BONDS: EGBs-GILTS CASH CLOSE: Afternoon Weakness Cements Weekly Bear Steepening

European curves bear steepened to close the week.

• Bonds leaned a little weaker in early trade, in part due to spill-over from a weak long-end US Treasury auction after the European cash close Thursday.
• Then EGBs/Gilts turned lower in early afternoon trade with no clear catalyst, though the move was amid fairly thin volumes and weekly lows were not pierced.
• Comments from BoE chief economist Pill were hawkish, but had little reaction as it's known he dissented against Thursday's rate cut.
• There was a modest bounce in Bunds alongside a Bloomberg headline reporting that the US and Russia are "planning Ukraine deal cementing Russian gains", but this did little to mitigate the earlier sell-off.
• Bunds underperformed Gilts across most of the curve. Periphery/semi-core EGB spreads tightened modestly as equities rallied going into the weekend.
• Curves bear flattened for the week: Germany (2Y +2.7bp, 10Y +1.1bp) outperformed the UK (2Y +10.6bp, 10Y +7.3bp) largely on account of the hawkish-leaning BOE decision.
• The early highlight next week is the UK labour market data for June/July.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 3.7bps at 1.956%, 5-Yr is up 5.7bps at 2.283%, 10-Yr is up 6bps at 2.69%, and 30-Yr is up 6.8bps at 3.206%.
• UK: The 2-Yr yield is up 2.2bps at 3.899%, 5-Yr is up 3.3bps at 4.037%, 10-Yr is up 5.4bps at 4.601%, and 30-Yr is up 7.7bps at 5.428%.
• Italian BTP spread down 0.4bps at 78.9bps / Spanish down 0.4bps at 56.7bps