EGBs-GILTS CASH CLOSE: Service Sector Recovery Helps Set Bearish Tone

EGBs and Gilts weakened Thursday amid strong European and US service sector data, and ahead of US nonfarm payrolls Friday.

• We saw fairly strong bear steepening in the Gilt curve, not helped by yet another weak BOE APF operation; 10-Yr BTP yields rose for the first session in five, though spreads remain relatively contained due to Bund weakness.
• Italy and Spain Services PMIs beat expectations to the upside, while the Eurozone and moreso the UK saw upward revisions in final readings vs flash.
• With no key European data (with the possible exception of Eurozone Apr retail sales), speakers or supply Friday, attention is almost entirely on the US employment report.

Closing German/UK Yields And 10-Yr Spreads To Germany

• Germany: The 2-Yr yield is down 0.5bps at -0.668%, 5-Yr is unchanged at -0.579%, 10-Yr is up 1.5bps at -0.183%, and 30-Yr is up 1.6bps at 0.379%.
• UK: The 2-Yr yield is up 2.7bps at 0.087%, 5-Yr is up 3.4bps at 0.371%, 10-Yr is up 4.2bps at 0.841%, and 30-Yr is up 4.3bps at 1.371%.
• Italian BTP spread up 0.5bps at 108.1bps / Spanish spread up 0.1bps at 65.3bps