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EGBs-GILTS CASH CLOSE: Hawkishness Increasingly Priced In

BONDS

Yields continued to soar across the curve Friday as a much stronger-than-expected US employment report dispelled any lingering doubts that the global monetary regime will be much more restrictive in 2022.

  • Weakness was evident from the very start of the session as hawkish sentiment carried over from Thursday's ECB/BoE decisions, with short-end Euribor most noticeably being sold as near-term ECB hikes were priced in.
  • Periphery EGBs also got hit hard amid ECB tightening prospects; GGB/Bund spread hit the widest since May 2020.
  • Long-end Gilts marginally outperformed Bunds though yields ended well up from intraday lows; UK short-end underperformed Germany though.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

  • Germany: The 2-Yr yield is up 8bps at -0.252%, 5-Yr is up 9.1bps at 0.048%, 10-Yr is up 6.1bps at 0.204%, and 30-Yr is up 2bps at 0.352%.
  • UK: The 2-Yr yield is up 11.5bps at 1.259%, 5-Yr is up 8.5bps at 1.305%, 10-Yr is up 3.9bps at 1.407%, and 30-Yr is up 2bps at 1.476%.
  • Italian BTP spread up 4.4bps at 154.4bps / Greek up 12.1bps at 206.5bps
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