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

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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

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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

Keep reading...Show less