EGBs-GILTS CASH CLOSE: Recession Fears Dominate

EGBs and Gilts rallied strongly Friday as global recession fears mounted.

• The rally began in the morning in a continuation of Thursday's risk-off move (mixed Eurozone CPI was market-neutral).
• The move accelerated in the afternoon as June US ISM Manufacturing was weaker than expected, fuelling further safe-haven bond buying on recession concerns.
  
• 2Y UK yields dropped nearly 27bp and Bobl by 23bp at one point, with ECB and BoE hiking swiftly priced out.
  
• The final hour of the session proved calmer, with yields coming off the lows as FX and equities stabilised - but curves ended firmly steeper given the short-end rally.

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

• Germany: The 2-Yr yield is down 13.2bps at 0.517%, 5-Yr is down 13.9bps at 0.928%, 10-Yr is down 10.4bps at 1.232%, and 30-Yr is down 5.2bps at 1.563%.
• UK: The 2-Yr yield is down 16.3bps at 1.679%, 5-Yr is down 16.5bps at 1.728%, 10-Yr is down 14.5bps at 2.084%, and 30-Yr is down 11.2bps at 2.452%.
• Italian BTP spread down 7bps at 185.8bps / Spanish down 4.5bps at 104.2bps