EGBs-GILTS CASH CLOSE: Weaker On Hawkish ECB Messaging

An early sell-off saw UK and German yields completely reverse their drop after Thursday's ECB decision, with bear steepening in both curves as 30Y segments underperformed.

• Several ECB speakers commented in the wake of Thursday's decision, but it was the hawks that spurred weakness on the open and set a negative tone for rates on the day.
• Hawkish ECB sources in an FT piece overnight looked to keep open the option of a rate hike in late '23. Other commentary was mixed: Muller, usually a hawk, played down the need for further hikes; Vasle said he was open to further hikes if needed; Simkus pointed to hope that Thursday's hike would be the last; de Guindos and Lagarde stuck to yesterday's script.
• Gilt yields rose for the 1st session in 4, alongside EGBs, with attention turning to the BoE decision next week.
• Multiple ratings decisions after market close Friday include Moody's on Greece, and S&P on Spain. GGBs have underperformed vs periphery peers despite hopes of a constructive assessment.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 5bps at 3.216%, 5-Yr is up 7.2bps at 2.692%, 10-Yr is up 8.3bps at 2.676%, and 30-Yr is up 9.1bps at 2.818%.
• UK: The 2-Yr yield is up 7.2bps at 5.022%, 5-Yr is up 5.3bps at 4.534%, 10-Yr is up 7.8bps at 4.359%, and 30-Yr is up 9.3bps at 4.701%.
• Italian BTP spread up 3.8bps at 178.5bps / Greek up 4bps at 142.2bps