EGBs-GILTS CASH CLOSE: Surprise 50bp BoE Hike Further Inverts Curves

The UK curve twist flattened Thursday as the Bank of England surprised with a 50bp hike, though the German curve underperformed in a bear flattening move.

• Central banks set a generally hawkish tone overall, with Norges Bank hiking 50bp vs the 25bp expected (SNB's 25bp was in line), before the BoE raised a half point in a 7-2 vote that was not foreseen by any analyst.
• 10 year Gilt yields jumped to session highs (4.447%) then dived to session lows (4.327%) within the first 15 minutes after the decision as traders assessed the implications of the move, before settling slightly lower on the day. 2Ys gyrated similarly but resolved higher on the day.
• Interestingly though German yields ended higher than UK counterparts on the day, with the BoE's front-loaded tightening possibly seen as precipitating a UK recession.
• Greece easily outperformed with 10Y spreads 6+bp tighter ahead of the weekend's elections (our briefing is here).
• Friday's early highlights are UK retail sales and Europe flash June PMIs.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 8.8bps at 3.221%, 5-Yr is up 8bps at 2.642%, 10-Yr is up 5.9bps at 2.494%, and 30-Yr is up 2.7bps at 2.509%.
• UK: The 2-Yr yield is up 3.1bps at 5.077%, 5-Yr is down 2.9bps at 4.562%, 10-Yr is down 3.8bps at 4.367%, and 30-Yr is down 2.8bps at 4.485%.
• Italian BTP spread up 2.1bps at 163.7bps / Greek down 6.6bps at 123.8bps