BONDS: EGBs-GILTS CASH CLOSE: Bunds Partially Fade Post-ECB Selloff
Jun-06 18:02
Core EGBs erased most of a nascent rally Friday, with Gilt yields finishing wider.
- The German curve bull flattened in early trade, fading the bear steepening following Thursday's ECB meeting, and weak French and German industrial production numbers helping the bid.
- Gilts ticked higher in sympathy but didn't keep pace with core EGBs.
- A solid US employment report in early afternoon saw Bunds and Gilts weaken in line with Treasuries, reversing much of the earlier yield drop.
- On the day, the German curve twist flattened, with Gilts underperforming Bunds and the UK belly underperforming.
- For the week however, Gilts outperformed Bunds. There was light bear steepening registered in both the German (2Y +1.8bp, 10Y +8bp) and UK (2Y -1.0bp, 10Y -0.3bp) curves.
- 10Y BTP/Bund spreads closed at another 4-year low. with periphery/semi-core EGBs broadly strengthening.
- Next week brings the UK April/May labour market report (Tuesday) and 2025 Spending Review (Wednesday), with the ECB Wage Tracker also out (Wednesday).
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 0.7bps at 1.88%, 5-Yr is up 0.4bps at 2.175%, 10-Yr is down 0.6bps at 2.576%, and 30-Yr is down 1.6bps at 3.009%.
- UK: The 2-Yr yield is up 0.6bps at 4.013%, 5-Yr is up 2.9bps at 4.155%, 10-Yr is up 2.8bps at 4.644%, and 30-Yr is up 1.4bps at 5.339%.
- Italian BTP spread down 1.8bps at 92.6bps / Greek down 2.4bps at 69.8bps
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US TSYS: Post-FOMC React
May-07 18:02
- Fast two-way trade after Fed holds rate steady, Treasury futures holding near recent highs.
- Tsy Jun'25 10Y futures currently +6 at 111-16 vs. -17 high (10Y yld at 4.2713%), initial technical resistance well above at 112-01.5 (High May 2).
- For bulls, price needs to trade above key short-term resistance at 112-20+, the May 1 high, to reinstate a bullish theme.
- Cross asset: BBG US$ index near recent highs at 1219.43 (+3.09).
FED: Instant Answers: Fed Holds Steady; Notes Two-Sided Risks Have Risen
May-07 18:00
- Federal Funds Rate Range Maximum: 4.5%
- Number of dissenters on size of rate move: ZERO
- Does the Fed say economic activity has slowed? No. "Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace ... Uncertainty about the economic outlook has increased further. The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen."
MNI: FED HOLDS RATES AT 4.25%-4.5%; VOTE 12-0
May-07 18:00
- MNI: FED HOLDS RATES AT 4.25%-4.5%; VOTE 12-0
- FED: ECONOMIC ACTIVITY STILL EXPANDING AT SOLID PACE
- FED: RISKS OF HIGHER UNEMPLOYMENT, INFLATION HAVE RISEN
- FED: UNCERTAINTY ABOUT OUTLOOK HAS INCREASED FURTHER
- FED: LABOR MARKET SOLID, INFLATION SOMEWHAT ELEVATED
