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EGBs-GILTS CASH CLOSE: Strong Rally On US Inflation Relief

BONDS

EGBs and Gilts rallied strongly Thursday in response to a softer-than-expected US CPI reading for October.

  • Terminal rate pricing for both the ECB and BoE fell sharply in the aftermath of the inflation data, and closed with about 12bp in hikes removed from each rate path to mid-2022.
  • The German and UK curves bull steepened on the day, with the belly outperforming on the German curve, and 10Y on the UK.
  • Periphery bonds rallied, with 10Y BTP yields falling nearly 30bp. BTP spreads to Bunds closed below 200bp for the first time since mid-July.
  • Attention swiftly turns to UK GDP and final German CPI first thing Friday.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

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EGBs and Gilts rallied strongly Thursday in response to a softer-than-expected US CPI reading for October.

  • Terminal rate pricing for both the ECB and BoE fell sharply in the aftermath of the inflation data, and closed with about 12bp in hikes removed from each rate path to mid-2022.
  • The German and UK curves bull steepened on the day, with the belly outperforming on the German curve, and 10Y on the UK.
  • Periphery bonds rallied, with 10Y BTP yields falling nearly 30bp. BTP spreads to Bunds closed below 200bp for the first time since mid-July.
  • Attention swiftly turns to UK GDP and final German CPI first thing Friday.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

Keep reading...Show less