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EGBs-GILTS CASH CLOSE: German Curve Fades Early Flattening

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European yields settled mostly lower Friday, with rates coming off morning highs in the afternoon. The German curve traded mixed, while the UK's twist flattened.

  • Segments of the German curve flattened to multi-year lows (5s30s were set for the lowest close since at least the early 1990s) on a combination of rising ECB hike bets and longer-term economic pessimism, but the move partially reversed in the afternoon as Bobl yields pulled back.
  • The UK short end underperformed despite next week's BoE hike pricing falling to just 53bp, down 12bp on the session, following weak retail sales data. Pricing out to mid-2023 held up, however, keeping short end yields underpinned.
  • Periphery spreads traded mostly flat on the session, narrowing from morning wides.
  • Some trading desks observed position squaring after a volatile week as a factor in the afternoon rally as well, with the UK and Japan observing holidays on Monday.

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

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European yields settled mostly lower Friday, with rates coming off morning highs in the afternoon. The German curve traded mixed, while the UK's twist flattened.

  • Segments of the German curve flattened to multi-year lows (5s30s were set for the lowest close since at least the early 1990s) on a combination of rising ECB hike bets and longer-term economic pessimism, but the move partially reversed in the afternoon as Bobl yields pulled back.
  • The UK short end underperformed despite next week's BoE hike pricing falling to just 53bp, down 12bp on the session, following weak retail sales data. Pricing out to mid-2023 held up, however, keeping short end yields underpinned.
  • Periphery spreads traded mostly flat on the session, narrowing from morning wides.
  • Some trading desks observed position squaring after a volatile week as a factor in the afternoon rally as well, with the UK and Japan observing holidays on Monday.

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

Keep reading...Show less