EGBs-GILTS CASH CLOSE: German Bull Steepening On Weak PMIs

Weaker-than-expected July PMI data that carried recessionary implications for the eurozone saw front-end EGB yields collapse to end the week, less than 24 hours after the ECB hiked 50bp.

• The bullish steepening move was extended in the afternoon on a big US Services PMI miss, but yields came off lows toward the cash close.
• Schatz yields fell over 22bp (German PMI was especially weak) as another 50bp ECB move in September was put under scrutiny.
• Conversely, UK PMIs beat consensus in contrast to the eurozone misses; Gilts underperformed.
• Periphery spreads tightened slightly amid a broader risk-on move triggered by less-hawkish central bank hike pricing.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany:

• Germany: The 2-Yr yield is down 22.3bps at 0.453%, 5-Yr is down 24.7bps at 0.777%, 10-Yr is down 19.2bps at 1.031%, and 30-Yr is down 11.8bps at 1.285%.
• UK: The 2-Yr yield is down 15.5bps at 1.846%, 5-Yr is down 14.2bps at 1.706%, 10-Yr is down 10.8bps at 1.939%, and 30-Yr is down 8bps at 2.451%.
• Italian BTP spread down 3.6bps at 228.6bps / Spanish down 4.2bps at 122.4bps