BONDS: EGBs-GILTS CASH CLOSE: Gilts Underperform On Data...Again

Gilts underperformed Bunds for a second day Thursday, with UK data again coming in firmer than expected.

• For the second consecutive session, Gilt yields gapped higher at the open, with UK labour market data a little firmer than expected on net, including an upward revision to May payrolls and solid private regular AWE but a slightly above-expected LFS unemployment rate.
• This reducing the implied probability of remaining 2025 cuts, in turn seeing the UK short-end underperform on the day.
• Spanish and French supply helped weigh on EGBs early as well.
• However, Gilts and Bunds regained ground over the course of the session, boosted in mid-afternoon trade by a spillover rally in US Treasuries as import price data came in on the soft side. With the long-end leading the rally, curves extended a flattening move going into the cash close.
• On the day, the German curve twist flattened, with the UK's bear flattening.
• Periphery / semi-core EGB spreads closed modestly wider.
• Friday's calendar is on the lighter side, with German producer prices and Eurozone current account / construction data. 

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.2bps at 1.862%, 5-Yr is down 0.1bps at 2.229%, 10-Yr is down 1.2bps at 2.675%, and 30-Yr is down 1.6bps at 3.198%.
• UK: The 2-Yr yield is up 5bps at 3.905%, 5-Yr is up 4.6bps at 4.088%, 10-Yr is up 1.6bps at 4.655%, and 30-Yr is up 1.3bps at 5.482%.
• Italian BTP spread up 0.3bps at 85.9bps / Spanish up 0.7bps at 61.6bps