EGBs-GILTS CASH CLOSE: Safe Haven Bid Into The Weekend

Friday's trade saw a strong safe haven bid develop going into the weekend, with geopolitical risk boosting core European FI.

• Bunds and Gilts climbed for most of the session before fading toward the cash close.
• At their strongest intraday point, bonds regained the ground lost Thursday after the strong US inflation report - as the dollar gained and equities fell in anticipation of potential risk-off weekend developments in the Middle East.
• The German curve bull flattened with the UK's twist flattening.
• In line with the safe-haven bid, periphery spreads widened for most of the session, with 10Y BTP widening past the 200bp mark once more to close on the wides (204bp). ECB's Visco and Simkus played down fragmentation risks and the need for ECB intervention over spreads.
• The UK takes centre-stage next week with labour market data out Tuesday and CPI on Wednesday.
• Potential ratings actions after Friday's close include Moody's on the EU and DBRS on Malta.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 2.2bps at 3.139%, 5-Yr is down 3.7bps at 2.679%, 10-Yr is down 4.9bps at 2.737%, and 30-Yr is down 4.2bps at 2.933%.
• UK: The 2-Yr yield is down 0.4bps at 4.846%, 5-Yr is down 1.1bps at 4.46%, 10-Yr is down 3.7bps at 4.386%, and 30-Yr is down 3.5bps at 4.829%.
• Italian BTP spread up 6.2bps at 203.9bps / Greek up 5.8bps at 156.3bps