EGBs-GILTS CASH CLOSE: Gilts Outperform Again With BoE Hikes Priced Out

Gilts outperform Bunds for a second consecutive session Thursday, with notable bull steepening in the UK curve as BoE hikes continued to be priced out.

• Following on from this week's BoE commentary which is seen relatively dovish, unexpectedly low BoE Decision Maker survey inflation expectations helped peak Bank Rate expectations dip nearly 10 basis points on the day, boosting the UK short-end.
• For the second consecutive session, European instruments weakened in afternoon trade alongside stronger-than-expected US data (jobless claims, unit labour costs), but the move didn't last.
• German yields fell in parallel fashion across most of the curve, with little change in ECB pricing.
• Periphery EGB spreads tightened modestly.
• Per the usual pre-meeting quiet period, no ECB speakers are scheduled between now and next Thursday's decision.
• After generally soft/dovish eurozone data Thursday (poor German industrial production and a downward revision to Q2 eurozone GDP), Friday brings final German inflation and multiple industrial production prints. No UK data of note.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 3.8bps at 3.084%, 5-Yr is down 4.4bps at 2.615%, 10-Yr is down 3.9bps at 2.614%, and 30-Yr is down 2.8bps at 2.745%.
• UK: The 2-Yr yield is down 10.2bps at 5.137%, 5-Yr is down 9.4bps at 4.716%, 10-Yr is down 7.9bps at 4.454%, and 30-Yr is down 7.8bps at 4.706%.
• Italian BTP spread down 2.2bps at 172.8bps / Spanish down 1.6bps at 103.5bps