EGBs-GILTS CASH CLOSE: Massive Rally On ECB And BoE Doubts

Bunds had a historic rally but were outperformed by Gilts and periphery EGBs Thursday as the BoE and ECB meetings suggested potential for more dovish rate hike paths ahead than previously expected.

• Following on from a dovish-leaning Fed press conference Wednesday, the BoE delivered a 50bp hike but didn't fully commit to further raises. And the ECB, which also hiked 50bp, was seen as wavering in its previous guidance to hike another half-point at the March meeting.
• The bond market moves appeared disproportionate given policymakers' overall cautious tone, but the rally accelerated in the afternoon in what appeared to be panic buying.
• 10Y Bund yields at one point were set to have their 2nd-biggest daily rally in the euro era (it ended as the 4th biggest), and yet were easily outperformed by BTPs which saw spreads drop ~19bp.
• Not to be outdone, 10Y Gilt yields had their biggest drop since 1994 (outside of last year's mini-budget related volatility).
• The US employment report will be Friday's focus, capping a busy week.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 17.5bps at 2.497%, 5-Yr is down 22.1bps at 2.097%, 10-Yr is down 20.4bps at 2.08%, and 30-Yr is down 12.6bps at 2.101%.
• UK: The 2-Yr yield is down 23.8bps at 3.201%, 5-Yr is down 30.4bps at 2.875%, 10-Yr is down 30.1bps at 3.006%, and 30-Yr is down 18.9bps at 3.523%.
• Italian BTP spread down 18.9bps at 182.4bps / Spanish down 8.1bps at 91.6bps