November 17, 2023 17:15 GMT
EGBs-GILTS CASH CLOSE: Short End Underperforms As Cut Pricing Fades
Gilts outperformed Bunds Friday, as a very strong week for core FI concluded in a constructive manner.
- The German and UK curves both twist flattened on the day, though early gains - following weak UK retail sales data - faded in afternoon trade.
- European short end instruments weakened on the day as ECB/BoE rate cut expectations pulled back from extremes in the afternoon, with global central bankers seen pushing back on rate cut speculation.
- That included multiple Fed speakers, and MNI's ECB sources piece noting policymakers are keen to ensure rate cuts are not priced prematurely.
- BTP spreads finished marginally wider after tightening intraday, ahead of Italy's sovereign ratings decision by Moody's after the cash close (a downgrade is not expected).
- Next week sees multiple data points of interest including flash November PMIs.
Closing Yields / 10-Yr Periphery EGB Spreads To Germany
- Germany: The 2-Yr yield is up 1.3bps at 2.964%, 5-Yr is up 1.2bps at 2.531%, 10-Yr is down 0.2bps at 2.588%, and 30-Yr is down 2.7bps at 2.802%.
- UK: The 2-Yr yield is up 0.2bps at 4.546%, 5-Yr is down 3.1bps at 4.119%, 10-Yr is down 4.7bps at 4.104%, and 30-Yr is down 4.7bps at 4.541%.
- Italian BTP spread up 0.6bps at 177bps / Spanish up 0.8bps at 100.9bps
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