EGBs-GILTS CASH CLOSE: Gilts In Rare Outperformance Of Bunds

Gilts outperformed Bunds Friday for the first time since May 16, with short ends in particular moving in opposite directions.

• The German curve bear flattened modestly, with the UK's bull steepening as some of the previous two sessions' sharp moves saw a partial unwind.
• 1bp was added to the ECB hike path to a fresh 1-month high close of 3.86% - 61bp of hikes left in the path, in accordance with ECB Makhlouf's comments today pointing to hikes in Jun and July and open to more later.
• BoE hike expectations dialled back (UK retail sales beat but downward revisions dampened the hawkish read). But the implied peak Bank rate was still 60bp higher than it began the week, with 107bp further hikes now expected.
• Periphery EGB spreads were mixed, with BTPs outperforming modestly.
• Attention will be on US debt limit negotiations over the weekend, but trade Monday will be thinned as UK and US markets are closed for a holiday.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 4.1bps at 2.943%, 5-Yr is up 2.7bps at 2.558%, 10-Yr is up 1.7bps at 2.539%, and 30-Yr is up 1bps at 2.674%.
• UK: The 2-Yr yield is down 6.1bps at 4.495%, 5-Yr is down 4.9bps at 4.279%, 10-Yr is down 3.5bps at 4.339%, and 30-Yr is down 0.3bps at 4.647%.
• Italian BTP spread down 2.4bps at 185.2bps / Spanish down 0.7bps at 106.2bps