EGBs-GILTS CASH CLOSE: German Inversions Impress, BTP Spreads Tighten

UK and German long-end yields fell sharply Wednesday, with curves flattening as short-end yields remained buoyed by above-consensus PMI data.

• European flash Nov PMIs mostly beat expectations, and pointed to both a potentially milder recession and softening price pressures as demand pulls back.
• That said, concerns over weak global activity / disinflation appeared to persist: German curve inversion accelerated after poor US PMIs, hitting new cycle lows in multiple spreads (2s10s, 2s5s, 2s30s).
• Periphery spreads tightened as the Euro rose vs USD and equities sustained gains, with BTP/Bund just shy of the tightest closing level since April.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 3.1bps at 2.141%, 5-Yr is up 0.3bps at 1.966%, 10-Yr is down 4.8bps at 1.93%, and 30-Yr is down 1.4bps at 1.876%.
• UK: The 2-Yr yield is down 1.2bps at 3.13%, 5-Yr is down 3.7bps at 3.184%, 10-Yr is down 12.6bps at 3.011%, and 30-Yr is down 12bps at 3.196%.
• Italian BTP spread down 3.7bps at 189.8bps / Spanish down 1.2bps at 98.2bps