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EGBs-GILTS CASH CLOSE: German Inversion Deepens

BONDS

European yields dropped sharply Wednesday in a mostly bull-flattening motion.

  • German 2s10s inversion set a fresh record for this cycle as part of a global flattening move, which occurred despite largely in-line/above-expected global data (including 41-year high UK CPI).
  • A multitude of ECB speakers (de Cos, Villeroy, Muller, Makhlouf among others) leaned mostly dovish on aggregate - terminal rate pricing fell 3bp on the day.
  • BTP spreads fell again but 10Y/Bund climbed 6bp off session lows.
  • Banks' early TLTRO repayments come into focus later this week (see our analysis of expectations, including links to MNI Policy exclusive interviews).
  • Gilts outperformed, with yields across the curve now well below pre-Sept mini-budget. Focus now turns to the UK Autumn Statement Thursday (preview here).

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

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European yields dropped sharply Wednesday in a mostly bull-flattening motion.

  • German 2s10s inversion set a fresh record for this cycle as part of a global flattening move, which occurred despite largely in-line/above-expected global data (including 41-year high UK CPI).
  • A multitude of ECB speakers (de Cos, Villeroy, Muller, Makhlouf among others) leaned mostly dovish on aggregate - terminal rate pricing fell 3bp on the day.
  • BTP spreads fell again but 10Y/Bund climbed 6bp off session lows.
  • Banks' early TLTRO repayments come into focus later this week (see our analysis of expectations, including links to MNI Policy exclusive interviews).
  • Gilts outperformed, with yields across the curve now well below pre-Sept mini-budget. Focus now turns to the UK Autumn Statement Thursday (preview here).

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

Keep reading...Show less