EGBs-GILTS CASH CLOSE: Peripheries End Week On A High Note

The German curve bull flattened Friday with the UK's bear flattening.

• BTP spreads led periphery tightening, falling 6bp on the day to the lowest in over a year. Greece was not far behind.
• This came amid a risk-on move more broadly (European equities gained on the day), but also as ECB hike pricing was relatively flat on the day as traders assessed Thursday's communications added to today's largely hawkish speakers (incl Holzmann, Runsch, Rehn, Villeroy).
• The morning saw Gilts outperforming as an BOE/Ipsos inflation attitudes survey showed expectations falling back, but UK yields resumed their march higher in the afternoon.
• The short-end/belly underperformed with attention turning to the Bank of England decision next week, which comes a day after a seemingly crucial UK CPI reading. BoE hike pricing was pulled back slightly Friday (3-4bp) to end a hawkish week, but 25bp is still 100% priced for next Thursday.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 0.3bps at 3.123%, 5-Yr is down 2.3bps at 2.582%, 10-Yr is down 3bps at 2.474%, and 30-Yr is down 3.4bps at 2.546%.
• UK: The 2-Yr yield is up 3.8bps at 4.945%, 5-Yr is up 3.9bps at 4.574%, 10-Yr is up 2.8bps at 4.412%, and 30-Yr is up 2.3bps at 4.525%.
• Italian BTP spread down 6.3bps at 156.3bps / Greek down 5.1bps at 130.6bps