EGBs-GILTS CASH CLOSE: Gilts Outperform Again As ECB Hike Seen Possible

Gilts outperformed Bunds for a 3rd consecutive session Friday, with Eurozone core yields relatively steady amid continued uncertainty over the ECB's next move.

• ECB's decision next Thursday, with analysts and market pricing split on whether the Governing Council will deliver a 25bp hike.
• Pricing briefly neared 40% probability of that outcome (vs closer to 33% Thursday) after MNI's latest ECB Exclusive sources piece out today pointed to the decision remaining in the balance, with hawks pushing for what could be their last data-based window to hike.
• This contrasted with a continued pullback in BoE hike pricing, with no particular catalyst but an extension of the recent post-BoE TSC and DMP pricing.
• The net result was a modest bull flattening in the German curve versus fairly sizeable bull steepening in the UK's.
• Greece sees a ratings review by DBRS after the market close Friday. Apart from the ECB meeting next week, UK data will be in focus, starting with the labour market report on Tuesday.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 0.3bps at 3.081%, 5-Yr is unchanged at 2.615%, 10-Yr is down 0.4bps at 2.61%, and 30-Yr is down 1bps at 2.735%.
• UK: The 2-Yr yield is down 6.8bps at 5.069%, 5-Yr is down 5.3bps at 4.663%, 10-Yr is down 3.1bps at 4.423%, and 30-Yr is down 0.2bps at 4.704%.
• Italian BTP spread up 1.1bps at 173.9bps / Greek down 0.6bps at 135.4bps