EGBs-GILTS CASH CLOSE: Lagarde's "Negative" Comments Positive For Bunds

Gilts outperformed Bunds Thursday, with morning weakness in both reversing early afternoon amid ECB Pres Lagarde's press conference. Curves little changed, with periphery spreads flat too.

• With the ECB leaving policy unchanged (as expected), the most market-moving comment was Lagarde saying negative interest rates were an effective tool for providing accommodation - not a big surprise, but triggered a reversal higher in Bunds and Euribor.
• But those moves faded, and RX and ER are trading more or less where they were at ECB decision time. Reuters sources piece after the meeting saying that the policy "hawks" did not call for a PEPP taper merely corroborated what Lagarde said.
• Large supply from France and Spain (>E16bn in nominals combined) saw little reaction.
• Friday sees flash PMIs and UK retail sales.

Closing yields/10-Yr Spreads to Bunds:

• Germany: The 2-Yr yield is up 0.6bps at -0.69%, 5-Yr is up 0.8bps at -0.599%, 10-Yr is up 1bps at -0.252%, and 30-Yr is up 0.5bps at 0.286%.
• UK: The 2-Yr yield is up 0.5bps at 0.043%, 5-Yr is unchanged at 0.316%, 10-Yr is unchanged at 0.74%, and 30-Yr is down 1bps at 1.275%.
• Italian BTP spread down 0.8bps at 100.7bps /Spanish down 0.9bps at 64.5bps