BONDS: EGBs-GILTS CASH CLOSE: Light EGB Gains Ahead Of Euro Inflation Round

European yields fell modestly to close the week.

• Yields largely reversed Thursday's rise, with a pullback seen through most of the session after an indifferent start (particularly for Gilts which looked to continue their yield rise in early trade).
• Bunds and Gilts largely shrugged off further solid US macro data in the form of personal consumption, as well as a notable uptick in crude oil prices.
• A sizeable core FI rally in late afternoon - with no discernable trigger - saw yields hit the low of the days, but they since ticked back up to close nearly flat for the session.
• European data wasn't a market mover: ECB 3Y consumer inflation expectations were steady at 2.5% (but 0.1pp above expected), while Spanish GDP was revised up going back to 2023.
• On the day, both the German and UK curves leaned bull flatter. For the week, the German curve twist flattened (2Y +0.7bp, 10Y -0.2bp), with the UK's bear flattening (2Y +3.3bp, 10Y +3.1bp).
• Periphery/semi-core EGB spreads closed mixed. OATs outperformed, with French PM Lecornu saying he would restart the contentious 2026 budget from scratch.
• The highlight early next week is the release of Eurozone flash September inflation data, while BOE speakers (including Ramsden Monday) bear watching.

Closing Yields / 10-Yr EGB Spreads To Germany:

• Germany: The 2-Yr yield is down 0.9bps at 2.03%, 5-Yr is down 2.5bps at 2.335%, 10-Yr is down 2.7bps at 2.746%, and 30-Yr is down 1.4bps at 3.328%.
• UK: The 2-Yr yield is down 0.4bps at 4.015%, 5-Yr is down 0.2bps at 4.175%, 10-Yr is down 1.1bps at 4.746%, and 30-Yr is down 0.5bps at 5.561%.
• Italian BTP spread up 0.1bps at 83.5bps / French OAT down 0.7bps at 82.2bps