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BONDS: EGBs-GILTS CASH CLOSE: Gilts Outperform On BoE Vote Split

BONDS
BulletMarketsFixed Income Bullets

Long-end European bonds sold off sharply Thursday, with Gilts a notable outperformer after the BoE decision.

  • Global yields rose in the aftermath of the Federal Reserve's hawkish rate outlook released late Wednesday.
  • But short-end/medium-term Gilts bucked the trend in Thursday's trade, as the BoE MPC split 6-3 in favour of a rate hold versus a 25bp rate cut, which led to a dovish reaction given expectations for an 8-1 vote.
  • Expectations for BoE rate cuts were duly pared, with around 17bp of cuts seen at the February meeting (was 13bp prior), with about 10bp added to implied easing through 2025 (around 60bp).
  • That helped Gilts outperform Bunds, after a lengthy period of underperformance seeing UK/German spreads rise to 34-year wides (to 227bp vs from 231bp at Wednesday's close).
  • The UK curve twist steepened, with Germany's bear steepening.
  • Periphery and semi-core spreads were little changed, with GGBs and BTPs widening around 1-2bp vs 10Y Bunds.
  • Friday's calendar includes UK retail sales.

Closing Yields / 10-Yr EGB Spreads To Germany

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Long-end European bonds sold off sharply Thursday, with Gilts a notable outperformer after the BoE decision.

  • Global yields rose in the aftermath of the Federal Reserve's hawkish rate outlook released late Wednesday.
  • But short-end/medium-term Gilts bucked the trend in Thursday's trade, as the BoE MPC split 6-3 in favour of a rate hold versus a 25bp rate cut, which led to a dovish reaction given expectations for an 8-1 vote.
  • Expectations for BoE rate cuts were duly pared, with around 17bp of cuts seen at the February meeting (was 13bp prior), with about 10bp added to implied easing through 2025 (around 60bp).
  • That helped Gilts outperform Bunds, after a lengthy period of underperformance seeing UK/German spreads rise to 34-year wides (to 227bp vs from 231bp at Wednesday's close).
  • The UK curve twist steepened, with Germany's bear steepening.
  • Periphery and semi-core spreads were little changed, with GGBs and BTPs widening around 1-2bp vs 10Y Bunds.
  • Friday's calendar includes UK retail sales.

Closing Yields / 10-Yr EGB Spreads To Germany

Keep reading...Show less