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EGBs-GILTS CASH CLOSE: OAT Spreads Tighten (For Now) Post-Election

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OAT and periphery EGB spreads tightened Monday following the 2nd round of French elections, with long-end German and UK instruments also gaining modest ground.

  • While the French result - which saw the leftist NFP surprisingly winning a plurality but far from an absolute majority - suggests medium-term political and fiscal uncertainty, the first-day market reaction was to fade some of the political risk premium built up over the past month.
  • It was otherwise a quiet session in terms of market-moving events, with limited European and US data. Published comments from BoE's Haskel were typically hawkish-leaning, while new UK Chancellor Reeves noted caution on the fiscal front.
  • Periphery/semi-core spreads came in off early wides as equities bounced from early weakness. BTPs and OATs led the way (respective 10Ys moved 3bp tighter to Bunds).
  • The German curve twist flattened, with the UK's bull flattening.
  • Most market attention this week will be on the US CPI reading Thursday, with UK GDP and some ECB and BoE speakers (Pill, Mann) on the agenda as well.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

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OAT and periphery EGB spreads tightened Monday following the 2nd round of French elections, with long-end German and UK instruments also gaining modest ground.

  • While the French result - which saw the leftist NFP surprisingly winning a plurality but far from an absolute majority - suggests medium-term political and fiscal uncertainty, the first-day market reaction was to fade some of the political risk premium built up over the past month.
  • It was otherwise a quiet session in terms of market-moving events, with limited European and US data. Published comments from BoE's Haskel were typically hawkish-leaning, while new UK Chancellor Reeves noted caution on the fiscal front.
  • Periphery/semi-core spreads came in off early wides as equities bounced from early weakness. BTPs and OATs led the way (respective 10Ys moved 3bp tighter to Bunds).
  • The German curve twist flattened, with the UK's bull flattening.
  • Most market attention this week will be on the US CPI reading Thursday, with UK GDP and some ECB and BoE speakers (Pill, Mann) on the agenda as well.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

Keep reading...Show less