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BONDS: EGBs-GILTS CASH CLOSE: Short Ends Underperform

BONDS
BulletMarketsFixed Income Bullets

Gilts easily outperformed Bunds Friday, with short ends underperforming on respective curves.

  • Hawkish repricing in Euro rates stood out, amid EUR weakness and ahead of next week's Euro inflation data. Implied ECB rate cuts were pared by around 7bp through 2025 (around 105bp seen through the year); BOE-implied remained relatively steady at 58bp (2bp less than the prior session).
  • A more solid-than-expected US ISM Manufacturing survey upped the pressure toward the European cash close.
  • In European data, German labour market data on balance showed some signs of revival. BOE November Money and Credit data indicated UK loan approvals were softer compared to October and consumer credit remains weak.
  • With the short end weakening, the German curve bear flattened sharply, with the UK's lightly twist flattening.
  • Periphery EGB spreads were little changed, though notably OATs underperformed for another session amid continued perceptions of fiscal and political risks.
  • There are no sovereign credit rating updates scheduled after Friday's market close, but MNI's ratings calendar for 2025 is here.
  • Next week's schedule is highlighted by the December Eurozone inflation round - MNI's preview is here.

Closing Yields / 10-Yr EGB Spreads To Germany

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Gilts easily outperformed Bunds Friday, with short ends underperforming on respective curves.

  • Hawkish repricing in Euro rates stood out, amid EUR weakness and ahead of next week's Euro inflation data. Implied ECB rate cuts were pared by around 7bp through 2025 (around 105bp seen through the year); BOE-implied remained relatively steady at 58bp (2bp less than the prior session).
  • A more solid-than-expected US ISM Manufacturing survey upped the pressure toward the European cash close.
  • In European data, German labour market data on balance showed some signs of revival. BOE November Money and Credit data indicated UK loan approvals were softer compared to October and consumer credit remains weak.
  • With the short end weakening, the German curve bear flattened sharply, with the UK's lightly twist flattening.
  • Periphery EGB spreads were little changed, though notably OATs underperformed for another session amid continued perceptions of fiscal and political risks.
  • There are no sovereign credit rating updates scheduled after Friday's market close, but MNI's ratings calendar for 2025 is here.
  • Next week's schedule is highlighted by the December Eurozone inflation round - MNI's preview is here.

Closing Yields / 10-Yr EGB Spreads To Germany

Keep reading...Show less