BONDS: EGBs-GILTS CASH CLOSE: Broad Weakness On US Job Jump

Strong US employment data Friday sealed EGB and Gilt losses for the week.

• European bonds traded mixed to start the session, with the habitual mixed US-Iran newsflow leaving Bunds and Gilts relatively steady going into the US Employment report.
• With US payroll gains more than doubling analyst expectations with higher prior revisions, global rates sold off aggressively as implied Federal Reserve tightening was brought forward from 2027 to end-2026, triggering short-end/belly underperformance.
• Earlier in the session, a softer than expected round of inflationary readings in the latest BoE DMP survey looked in MNI's view to decrease the odds of additional hawkish MPC dissenters later this month and reduce the odds of a July hike.
• In Eurozone data, compensation per employee eased in Q1, while GDP's downward revision (-0.2% vs +0.1% flash) was as expected on the back of a poor Irish print.
• Gilts outperformed Bunds, with both the German and UK curves leaning bear flatter. Periphery/semi-core spreads closed the session little changed/slightly wider.
• For the week as a whole, curves bear flattened: UK 2Y yield +13bp, 10Y +9bp; German 2Y +16bp, 10Y +10bp.
• Next week's highlight is the ECB decision Thursday.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 3.1bps at 2.692%, 5-Yr is up 2.9bps at 2.768%, 10-Yr is up 1.5bps at 3.038%, and 30-Yr is up 0.8bps at 3.571%.
• UK: The 2-Yr yield is up 0.5bps at 4.338%, 5-Yr is up 1.2bps at 4.464%, 10-Yr is up 0.5bps at 4.903%, and 30-Yr is up 0.2bps at 5.588%.
• Italian BTP spread up 1.7bps at 76.3bps / French OAT up 0.4bps at 65bps