EGBs-GILTS CASH CLOSE: US Bank Fears Drag Down European Yields

Concerns over the US banking sector rippled through Europe Friday, with German and UK yields plummeting intraday before stabilising slightly before the cash close.

• German and UK yields tested their lowest levels in the month, with short end yields leading the charge (Schatz yields were at one point set to fall by 26bp, the biggest daily drop since 2008).
• Yields came off their session lows in the last hour of cash trade with some apparent relief on the US banking front as stocks bounced, but remained firmly lower on the day, with some re-steepening after the flattening earlier in the week.
• Terminal hike pricing for the ECB and Fed pared back about 25bp in tandem with Fed rate retracement.
• BTP spreads were fairly well-contained given the circumstances, with the 10Y spread closing just above 180bp.
• Fallout from today's closure by regulators of Silicon Valley Bank - whose troubles triggered the panic - will be eyed over the weekend, with the ECB decision and US CPI coming into focus later in the week.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 18bps at 3.097%, 5-Yr is down 15.1bps at 2.643%, 10-Yr is down 13.5bps at 2.508%, and 30-Yr is down 12.1bps at 2.468%.
• UK: The 2-Yr yield is down 16.9bps at 3.642%, 5-Yr is down 16.3bps at 3.525%, 10-Yr is down 15.6bps at 3.64%, and 30-Yr is down 11bps at 4.012%.
• Italian BTP spread up 6.5bps at 181.1bps / Spanish up 3.4bps at 103.6bps