BONDS: EGBs-GILTS CASH CLOSE: Long-End Relief Rally Extends

European long-end yields declined for a second day Thursday.

• The rally in core FI that started early Wednesday continued unimpeded for much of the morning session, helped in part by softer oil prices and solid digestion of European supply, including Spanish and French auctions.
• The latest BoE DMP survey pointed to a softening employment picture, while a strong 20Y linker auction saw a bull flattening move in Gilts extend. In other data, Eurozone July retail sales were on the soft side.
• The fall in yields was interrupted in mid-afternoon, with equities rallying and US ISM Services headline data proving stronger-than-expected, but yields ultimately closed lower on the day.
• The German and UK curves both bull flattened, with Gilts outperforming Bunds.
• Periphery/semi-core EGB spreads tightened by around 2bp alongside the pickup in equities and aforementioned smooth EGB auction digestion.
• Friday's European calendar includes German factory orders and UK retail sales data (as well as Eurozone Q2 GDP revisions/details and labour market figures), while global focus will be on the US employment report later in the session.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 0.2bps at 1.964%, 5-Yr is down 1bps at 2.27%, 10-Yr is down 2.1bps at 2.719%, and 30-Yr is down 1.9bps at 3.337%.
• UK: The 2-Yr yield is down 1.1bps at 3.949%, 5-Yr is down 2bps at 4.11%, 10-Yr is down 2.8bps at 4.72%, and 30-Yr is down 2.9bps at 5.574%.
• Italian BTP spread down 2.3bps at 85bps  / French OAT down 2.3bps at 77.6bps