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EGBs-GILTS CASH CLOSE: OAT And BTP Spreads Tighten For 3rd Straight Day

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The German and UK curves flattened Wednesday, with periphery / semi-core EGB spreads tightening for the 3rd consecutive session.

  • Core EGBs/Gilts were flat/lower in the morning, with weakness concentrated in at the short end. Then in the afternoon, Treasuries jumped on weak US data including a contractionary ISM Services reading, with the rally spilling over into European FI.
  • The 10Y Oat/Bund spread fell another 3bp to 68bp and is now 15bp tighter on the week following Sunday's first-round elections. One trigger: 200 candidates from centrist/left-wing parties have withdrawn from second round elections in order to limit right-wing gains.
  • BTP and GGB spreads continued compressing in sympathy. Gilts outperformed Bunds.
  • Bank of Latvia Gov Kazaks, and separately Eurosystem sources, told MNI that the ECB was on track to achieve its 2% inflation target.
  • The main focus on Thursday will be the UK election (MNI's preview here), though results will only begin to come in after the market close. We also get the accounts of the ECB's June meeting.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

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The German and UK curves flattened Wednesday, with periphery / semi-core EGB spreads tightening for the 3rd consecutive session.

  • Core EGBs/Gilts were flat/lower in the morning, with weakness concentrated in at the short end. Then in the afternoon, Treasuries jumped on weak US data including a contractionary ISM Services reading, with the rally spilling over into European FI.
  • The 10Y Oat/Bund spread fell another 3bp to 68bp and is now 15bp tighter on the week following Sunday's first-round elections. One trigger: 200 candidates from centrist/left-wing parties have withdrawn from second round elections in order to limit right-wing gains.
  • BTP and GGB spreads continued compressing in sympathy. Gilts outperformed Bunds.
  • Bank of Latvia Gov Kazaks, and separately Eurosystem sources, told MNI that the ECB was on track to achieve its 2% inflation target.
  • The main focus on Thursday will be the UK election (MNI's preview here), though results will only begin to come in after the market close. We also get the accounts of the ECB's June meeting.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

Keep reading...Show less