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BONDS: EGBs-GILTS CASH CLOSE: Relief Rally Concludes An Otherwise Poor Week

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European yields fell Friday, led by Gilts which had underperformed badly throughout the week.

  • Equity weakness helped underpin global core FI in early trade. A softer-than-expected US PCE report helped Treasuries rally in the early European afternoon, helping extend the Bund and Gilt rally. European data had little impact: Eurozone flash consumer confidence and UK retail sales were weaker than expected, with German PPI a bit stronger.
  • The UK curve bull steepened, with Germany's curve shifting down largely in parallel.
  • 10Y Gilt yields closed the week 10bp higher, versus 3bp for Bund; 2Y UK yields closed 4bp higher (reflecting a paring of expected BOE easing after UK CPI and labour market data and the impact of a hawkish Fed, and despite a more dovish BOE decision vote split than expected), whereas German Schatz yields fell 4bp.
  • Periphery spreads widened early, but narrowed in afternoon trade alongside a broader risk asset relief rally. BTPs marginally outperformed.
  • In issuance, Italy announced E330-350bln of bonds planned to be issued in 2025, down from E361bln in 2024. Meanwhile the BOE announced its APF sales schedule for Q1: all auctions will be bit smaller than in Q4-24 - but there was no gilt reaction.
  • Next week is unsurprisingly much thinner on the data/events front given the holidays, with some final Q3 GDP readings among the limited highlights, and no scheduled ECB / BoE speakers.

Closing Yields / 10-Yr EGB Spreads To Germany

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European yields fell Friday, led by Gilts which had underperformed badly throughout the week.

  • Equity weakness helped underpin global core FI in early trade. A softer-than-expected US PCE report helped Treasuries rally in the early European afternoon, helping extend the Bund and Gilt rally. European data had little impact: Eurozone flash consumer confidence and UK retail sales were weaker than expected, with German PPI a bit stronger.
  • The UK curve bull steepened, with Germany's curve shifting down largely in parallel.
  • 10Y Gilt yields closed the week 10bp higher, versus 3bp for Bund; 2Y UK yields closed 4bp higher (reflecting a paring of expected BOE easing after UK CPI and labour market data and the impact of a hawkish Fed, and despite a more dovish BOE decision vote split than expected), whereas German Schatz yields fell 4bp.
  • Periphery spreads widened early, but narrowed in afternoon trade alongside a broader risk asset relief rally. BTPs marginally outperformed.
  • In issuance, Italy announced E330-350bln of bonds planned to be issued in 2025, down from E361bln in 2024. Meanwhile the BOE announced its APF sales schedule for Q1: all auctions will be bit smaller than in Q4-24 - but there was no gilt reaction.
  • Next week is unsurprisingly much thinner on the data/events front given the holidays, with some final Q3 GDP readings among the limited highlights, and no scheduled ECB / BoE speakers.

Closing Yields / 10-Yr EGB Spreads To Germany

Keep reading...Show less