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EGBs-GILTS CASH CLOSE: Recession Fears Dominate

BONDS

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:

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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:

Keep reading...Show less