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EGBs-GILTS CASH CLOSE: UK Curve Bull Steepens On Dovish Developments

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Gilts easily outperformed Bunds Friday on soft data and dovish BoE commentary.

  • An early rally - triggered by Israel's attack on Iran overnight which spurred very large trading volumes in Bund futures, and softer than-expected UK retail sales - faded later in the morning as geopolitical risk premia subsided.
  • Gilts pared losses in mid-afternoon after a speech by BoE's Ramsden leaned dovish, noting that inflation risks were to the downside.
  • ECB's Wunsch, who has a hawkish reputation, dovishly noted potential for back-to-back cuts in June and July.
  • There's now 52bp of BoE cuts priced for the year, vs around 42bp Thursday; ECB implied cuts were pared to 74bp from 76bp. Consequently, the UK curve bull steepened with Germany's twist flattening.
  • Periphery EGB spreads closed mixed, with Italy underperforming. S&P reviews Greece's and Italy's credit ratings after the weekly close.
  • Next week's schedule includes Eurozone flash PMIs.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

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Gilts easily outperformed Bunds Friday on soft data and dovish BoE commentary.

  • An early rally - triggered by Israel's attack on Iran overnight which spurred very large trading volumes in Bund futures, and softer than-expected UK retail sales - faded later in the morning as geopolitical risk premia subsided.
  • Gilts pared losses in mid-afternoon after a speech by BoE's Ramsden leaned dovish, noting that inflation risks were to the downside.
  • ECB's Wunsch, who has a hawkish reputation, dovishly noted potential for back-to-back cuts in June and July.
  • There's now 52bp of BoE cuts priced for the year, vs around 42bp Thursday; ECB implied cuts were pared to 74bp from 76bp. Consequently, the UK curve bull steepened with Germany's twist flattening.
  • Periphery EGB spreads closed mixed, with Italy underperforming. S&P reviews Greece's and Italy's credit ratings after the weekly close.
  • Next week's schedule includes Eurozone flash PMIs.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

Keep reading...Show less