BONDS: EGBs-GILTS CASH CLOSE: PMIs See Yields Rise
Aug-21 17:22
Strong global purchasing managers' indices released Thursday saw European yields reverse much of the prior session's fall.
- Rates sold off on stronger-than-expected Eurozone and UK August flash composite PMIs (though EZ Manufacturing beat with Services missing, whereas in the UK it was vice-versa). Latest UK monthly public finance data looked a little better than expected but was marred by revisions to the Apr-Jun data.
- Combined with very strong US PMIs combined with hawkish Fed-speak, there was plenty to keep the pressure on both ends of the yield curve through the cash close.
- The German curve leaned bear flatter, with underperformance in the belly, while Gilts underperformed overall in a bear-steepening move with 10Y the weakest segment.
- Periphery / semi-core EGB spreads widened steadily throughout the session as equities remained under pressure from the higher yield environment - 10Y BTP/Bund closed at its widest level in 13 sessions (Aug 4).
- The regional calendar includes Q2 Eurozone negotiated wage data, German final GDP, and French manufacturing confidence, with global attention on Federal Reserve Chair Powell's Jackson Hole speech on Friday (1500 UK time).
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 3.9bps at 1.972%, 5-Yr is up 4.2bps at 2.315%, 10-Yr is up 4bps at 2.757%, and 30-Yr is up 3.3bps at 3.327%.
- UK: The 2-Yr yield is up 4.8bps at 3.97%, 5-Yr is up 4.8bps at 4.124%, 10-Yr is up 5.7bps at 4.729%, and 30-Yr is up 4.7bps at 5.578%.
- Italian BTP spread up 1.6bps at 82.4bps / French OAT up 1.2bps at 70.7bps
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