EGBs-GILTS CASH CLOSE: Rally Reverses, UK CPI Eyed Next Week

Gilts and Bunds sold off Friday as the US inflation data-induced rally of the prior two sessions partially reversed ahead of the weekend.

• Core FI yields opened sharply higher, in part on hawkish comments by Fed Gov Waller overnight, but began rallying anew, with Gilt yields moving to fresh lows for the week.
• The rally lost steam in the afternoon though, with the reversal accelerating toward the cash close after the University of Michigan survey showed unexpectedly strong US consumer confidence and an uptick in inflation expectations.
• The UK short end underperformed Germany's as BoE hike pricing rebounded, possibly with a focus on inflation data next week; further down the curve (5s-10s), German instruments underperformed.
• Greece underperformed on the periphery, with spreads widening on the week despite a broader risk rally. Moody's review of Spain is the highlight of the ratings schedule after hours Friday.
• Next week's main event is UK CPI on Wednesday.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 5.8bps at 3.21%, 5-Yr is up 4.6bps at 2.611%, 10-Yr is up 2.7bps at 2.512%, and 30-Yr is up 0.4bps at 2.533%.
• UK: The 2-Yr yield is up 6.9bps at 5.206%, 5-Yr is up 2.1bps at 4.587%, 10-Yr is up 2.2bps at 4.444%, and 30-Yr is up 1.7bps at 4.556%.
• Italian BTP spread up 0.5bps at 165.9bps / Greek up 3.1bps at 145.2bps