EGBs-GILTS CASH CLOSE: Pullback On Multiple Factors

Core FI largely reversed the prior session's gains Thursday, with multiple factors weighing increasingly on Bunds and Gilts as the session went on.

• After largely constructive trade in the European morning session, helped by softer oil/gas prices, stronger-than-expected US manufacturing survey data (Philly Fed) helped kick off global core FI weakness in the afternoon, aided by a bounce in energy prices and hawkish-leaning Fedspeak.
• While ECB speakers maintained broad consensus on a June rate cut, Austria's Holzmann broke from the Governing Council's recent rhetoric by noting that the ECB's rate cut cycle would be restrained if Federal Reserve easing proved limited.
• The German and UK curves leaned bear flatter, with Gilts outperforming Bunds.
• Periphery EGB spreads widened in mid-afternoon before later re-tightening, mirroring moves in equities.
• Early Friday sees UK retail sales data.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany:

• Germany: The 2-Yr yield is up 4.2bps at 2.986%, 5-Yr is up 4.2bps at 2.517%, 10-Yr is up 3.7bps at 2.502%, and 30-Yr is up 3.3bps at 2.632%.
• UK: The 2-Yr yield is up 2.5bps at 4.488%, 5-Yr is up 0.7bps at 4.192%, 10-Yr is up 1.4bps at 4.275%, and 30-Yr is up 3bps at 4.724%.
• Italian BTP spread down 1.5bps at 143bps / Spanish down 2bps at 81.8bps