EGBs-GILTS CASH CLOSE: Gains Fade, But UK Short-End Rally Stands Out

Gilts and core EGBs strengthened Thursday, with periphery spreads mostly wider.

• The session began with a risk-off tone in a resumption of the previous day's price action. Gilts and Bunds both gained, helped by an unexpected PBOC rate cut overnight, soft German IFO data, and weak corporate earnings reports - each of which underlined global growth concerns.
  
• Price action shifted negative in the afternoon following stronger-than-expected US GDP data, though Bund and Gilt futures partially recovered and closed higher on the day.
  
• The German curve bull flattened, with the UK's bull steepening.
• UK short-end outperformance was notable, with 2Y yields seeing their lowest close since May 2023 as BoE rate cut probabilities crept higher.
• Having widened in early trade, periphery EGB spreads regained ground over the course of the session as equities found their footing. BTPs underperformed, closing wider to Bunds, with PGBs outperforming.
• Looking ahead, Friday's docket includes more Eurozone consumer confidence surveys, and ECB inflation expectations.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 2.1bps at 2.634%, 5-Yr is down 2.2bps at 2.348%, 10-Yr is down 2.7bps at 2.417%, and 30-Yr is down 3.2bps at 2.629%.
• UK: The 2-Yr yield is down 4.1bps at 3.948%, 5-Yr is down 2.5bps at 3.917%, 10-Yr is down 2.6bps at 4.13%, and 30-Yr is down 0.3bps at 4.67%.
• Italian BTP spread up 1.1bps at 136.1bps / Portuguese down 1.2bps at 64.1bps