EGBs-GILTS CASH CLOSE: UK Curve Steepens As BoE Holds

The Bank of England's decision to hold rates saw the UK curve steepen Thursday, with the German curve following suit.

• After global bonds sold off overnight in the wake of the Fed's hawkish rate hold, a dovish tone was restored in early European trade with the SNB's unexpected hold and in-line hikes by the Riksbank and Norges Bank. The BoE's 5-4 decision to hold rates - which was only 45% priced in vs a 25bp hold - marked the peak for European core FI for the day.
• After selling off in the afternoon, UK and German yields fell back and finished off session highs.
• Helping the recovery were multiple comments by ECB participants across the hawk-dove spectrum pointing to prospects of an extended hold including Stournaras, Wunsch, and Knot.
• The UK curve finished sharply bear steeper with Germany's modestly twist steepening.
• Periphery EGB spreads widened, led by Italy, amid a broader risk-off move that accelerated in the afternoon as equities dropped and curves re-steepened.
• Friday sees UK retail sales data and September flash PMIs.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 0.3bps at 3.257%, 5-Yr is up 2.2bps at 2.756%, 10-Yr is up 3.5bps at 2.737%, and 30-Yr is up 2.8bps at 2.87%.
• UK: The 2-Yr yield is up 2.5bps at 4.873%, 5-Yr is up 3.3bps at 4.426%, 10-Yr is up 9bps at 4.305%, and 30-Yr is up 7.7bps at 4.709%
• .Italian BTP spread up 5.5bps at 180.4bps / Greek up 4.6bps at 142bps