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EGBs-GILTS CASH CLOSE: Morning Rally Reverses

BONDS

Bunds and Gilts staged a huge reversal over the course of the afternoon session, with yields coming off multi-month lows and bull flattening reversing.

  • Periphery spreads widened over the entire session though, which was very much risk-off with several European equity indices dropping 2+% on global growth concerns.
  • The ECB unveiled the conclusions of its strategy review, which says in part that the central bank will adopt a symmetric 2% inflation target (implying overshoots will be allowed). However this was not seen as market-moving, as the conclusions were largely anticipated well in advance.
  • Ireland sold E1.5bln of IGBs, concluding European bond supply this week.
  • We'll get multiple ECB speakers Friday, plus the delayed publication of the June meeting accounts. UK GDP is Friday's data focus.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

  • Germany: The 2-Yr yield is down 0.7bps at -0.683%, 5-Yr is down 0.9bps at -0.603%, 10-Yr is down 0.9bps at -0.307%, and 30-Yr is down 0.4bps at 0.183%.
  • UK: The 2-Yr yield is up 2.3bps at 0.085%, 5-Yr is up 0.9bps at 0.264%, 10-Yr is up 1.2bps at 0.612%, and 30-Yr is up 0.7bps at 1.128%.
  • Italian BTP spread up 3.1bps at 107bps / Spanish spread up 2.7bps at 65.5bps

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