EGBs-GILTS CASH CLOSE: Yields Partially Rebound From Thursday's Drop

European yields partially rebounded Friday from the prior session's US CPI-induced drop.

• Yields rose in early trade, amid small upward revisions in French and Spanish final June inflation data, and an uptick in oil prices.
• Pressure peaked in early afternoon after US producer price indices came in stronger than expected.
• But the move faded after PPI details looked less worrying, with the effect later compounded by soft US consumer sentiment data (UMichigan), helping European yields close toward the lower end of the daily range and well below the week's highs.
• Periphery spreads tightened modestly, led by BTPs, with equities rising sharply (Eurostoxx futures +1.3%). 10Y OAT/Bund spread closed flat on both the day and the week (65.6bp).
• Next week's risk events include UK CPI Wednesday, with the ECB decision Thursday - while there are no expectations of a rate cut, communications will be eyed for the outlook for September's expected easing.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 3.1bps at 2.823%, 5-Yr is up 3.6bps at 2.475%, 10-Yr is up 3.3bps at 2.496%, and 30-Yr is up 2.5bps at 2.683%.
• UK: The 2-Yr yield is up 1.8bps at 4.086%, 5-Yr is up 2.6bps at 3.948%, 10-Yr is up 3.5bps at 4.109%, and 30-Yr is up 2.6bps at 4.615%.
• Italian BTP spread down 2.4bps at 129.7bps / Spanish down 0.5bps at 76.4bps