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BONDS: EGBs-GILTS CASH CLOSE: Gilts Underperform Alongside BoE Reappraisal

BONDS
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Core European curves bear steepened Thursday, reversing some of the prior session's flattening.

  • Gilts outperformed core EGBs ahead of the Bank of England decision, with the space as a whole weighed down by supply pressure (French/Spanish bond auctions), a risk-on move in equities, and solid German factory order data.
  • The BoE decision appeared to vindicate the move as it brought an immediate dovish reaction with MPC member Mann surprisingly dissenting in favour of a 50bp cut vs the 25bp delivered (joining dove Dhingra).
  • However that proved temporary, with a bearish reversal following the decision \as the details were digested, including as closer inspection of the Bank's higher-than-expected  inflation projections, while Gov Bailey noted uncertainty over future cuts.
  • For the day, Gilts underperformed Bunds, with both curves bear steepening.
  • Periphery EGB spreads tightened, benefiting from European equities reaching fresh record highs.
  • Friday's calendar includes appearances by BOE's Pill and ECB's Guindos.

Closing Yields / 10-Yr EGB Spreads To Germany

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Core European curves bear steepened Thursday, reversing some of the prior session's flattening.

  • Gilts outperformed core EGBs ahead of the Bank of England decision, with the space as a whole weighed down by supply pressure (French/Spanish bond auctions), a risk-on move in equities, and solid German factory order data.
  • The BoE decision appeared to vindicate the move as it brought an immediate dovish reaction with MPC member Mann surprisingly dissenting in favour of a 50bp cut vs the 25bp delivered (joining dove Dhingra).
  • However that proved temporary, with a bearish reversal following the decision \as the details were digested, including as closer inspection of the Bank's higher-than-expected  inflation projections, while Gov Bailey noted uncertainty over future cuts.
  • For the day, Gilts underperformed Bunds, with both curves bear steepening.
  • Periphery EGB spreads tightened, benefiting from European equities reaching fresh record highs.
  • Friday's calendar includes appearances by BOE's Pill and ECB's Guindos.

Closing Yields / 10-Yr EGB Spreads To Germany

Keep reading...Show less