EGBs-GILTS CASH CLOSE: Strong Rally As Growth Fears Re-Emerge

European FI enjoyed a very strong start to the week/month, with bull flattening in the UK and German curves, and periphery spreads flattening.

• A fairly subdued morning with modest weakness gave way to increasing strength as the session went on, with Italy and Spain PMIs disappointing, and later, the US Manufacturing ISM pointing to inflation and activity slowing.
• As we entered the cash close, gains in FI were accelerating, as equities began to pare substantial gains made earlier in the session. No particular trigger seen, but potentially geopolitical (Iran rumblings) and general growth risks.
• Notably, German 30Y yields fell below 0% for the first time since February.
• A quiet slate Tuesday, Austria and the UK sell bonds.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 1.3bps at -0.775%, 5-Yr is down 1.3bps at -0.755%, 10-Yr is down 2.6bps at -0.487%, and 30-Yr is down 3.1bps at -0.011%.
• UK: The 2-Yr yield is down 2.6bps at 0.034%, 5-Yr is down 4.1bps at 0.225%, 10-Yr is down 4.4bps at 0.521%, and 30-Yr is down 3.6bps at 0.958%.
• Italian BTP spread down 2.4bps at 105.8bps / Spanish down 0.9bps at 72bps