EGBs-GILTS CASH CLOSE: UK Short-End Leads Gains As BoE Narrowly Cuts

Core European yields closed sharply lower Thursday, as the BoE delivered a rate cut and data spurred concern over slowing growth.

• Following on from the dovish impulse from Wednesday's Fed press conference, 2Y UK yields saw their 3rd biggest daily drop of the year Thursday with the BoE opting by a 5-4 vote to cut rates by 25bp. The UK and German curves both bull steepened.
• Soft data was a theme all day: German unemployment unexpectedly ticked higher, while US initial jobless claims pushed higher and the ISM Manufacturing report was weaker than expected, particularly in the employment component - all of which is in increased focus ahead of Friday's US payrolls report.
• Safe-haven bonds gained for most of the session as equities dropped in the European afternoon, with the evaporation in risk appetite seeing periphery EGB spreads move wider.
• Apart from US nonfarm payrolls which is the main global event, Friday's data schedule includes Euro national industrial production and retail sales prints, while BoE Chief Economist Pill makes an appearance.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 7.5bps at 2.456%, 5-Yr is down 6.7bps at 2.165%, 10-Yr is down 5.8bps at 2.246%, and 30-Yr is down 4.7bps at 2.467%.
• UK: The 2-Yr yield is down 10.4bps at 3.722%, 5-Yr is down 9.6bps at 3.669%, 10-Yr is down 8.7bps at 3.883%, and 30-Yr is down 5.6bps at 4.48%.
• Italian BTP spread up 5.5bps at 140.1bps / Spanish up 3.6bps at 84.8bps