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EGBs-GILTS CASH CLOSE: Yields Close Near Lows Despite Equity Rebound

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Yields closed near session lows Thursday despite a bounce in equities in the afternoon.

  • Both the German and UK curves bull flattened, but UK instruments outperformed. 10Y yields dropped over 16bp, as real yields fell 27bp (implied inflation breakevens rose 10bp).
  • BTP spreads vs Bunds continued to narrow from levels above 200bp.
  • They continue to mirror ECB policy rate expectations, which fell to a May low of 19bp at end-2022 (77bp of hikes) from above 35bp last week. That's despite several ECB officials seemingly endorsing a July hike this week, including Makhlouf today.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany:

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Yields closed near session lows Thursday despite a bounce in equities in the afternoon.

  • Both the German and UK curves bull flattened, but UK instruments outperformed. 10Y yields dropped over 16bp, as real yields fell 27bp (implied inflation breakevens rose 10bp).
  • BTP spreads vs Bunds continued to narrow from levels above 200bp.
  • They continue to mirror ECB policy rate expectations, which fell to a May low of 19bp at end-2022 (77bp of hikes) from above 35bp last week. That's despite several ECB officials seemingly endorsing a July hike this week, including Makhlouf today.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany:

Keep reading...Show less