BONDS: EGBs-GILTS CASH CLOSE: Second Day Of Gains Fails To Pare Weekly Losses

Jul-10 18:23

European yields fell for a second consecutive session Friday, but remained far above levels seen at the start of the week.

Overnight gains in global FI spurred in part by a JGB rally (Japan FinMin calling on pension funds to purchase domestic assets) would fade as oil prices picked up off lows on continued lingering concern over the US-Iran situation heading into the weekend.
Such concerns appeared to prove well-founded around 1.5 hours before the European cash close, when US President Trump declared on social media that the ceasefire was "over". 10Y core yields rose a quick 2+bp to session highs: Bund to 3.091% with Gilt to 4.907%.
But yields would descend from there into the close, in part because Trump also noted talks would continue, and Axios later reported that another round of US-Iran negotiations is expected next week.
Yields closed at/near the lows, and on the day the UK and German curves bull flattened, with Gilts outperforming Bunds. Periphery/semi-core EGB spreads tightened for a second day, with BTPs outperforming.
On the week, the UK curve bear flattened (2Y yield +10bp, 10Y +9bp) while Germany's bear steepened (2Y +11bp, 10Y +13bp).
Next week's calendar is lighter in terms of data, with UK monthly activity and final Eurozone June inflation reports due. We also hear from BOE's Bailey and Pill, along with pre-quiet period commentary from ECB's Schnabel and Nagel.

Closing Yields / 10-Yr EGB Spreads To Germany

Germany: The 2-Yr yield is unchanged at 2.647%, 5-Yr is down 0.5bps at 2.761%, 10-Yr is down 1.9bps at 3.065%, and 30-Yr is down 2.1bps at 3.605%.
UK: The 2-Yr yield is down 2bps at 4.221%, 5-Yr is down 2.3bps at 4.406%, 10-Yr is down 2.5bps at 4.872%, and 30-Yr is down 2.6bps at 5.598%.
Italian BTP spread down 1.7bps at 73.7bps / French OAT down 0.3bps at 76.8bps

Want to read more?

Find more articles and bullets on these widgets:

Jun-10 18:18

Wednesday's Europe rates/bond options flow included:

Jun-10 18:16

PMIs Imply Further Intensification Although To Less Degree Than Input Costs

May final PMI (Jun 3): “A key finding of the May survey results was regarding prices, as the latest data showed a further intensification of inflationary pressures across the eurozone economy. Input costs rose at the sharpest rate in three-and-half years, while charge inflation hit a 38-month high.”

Welcome, But Only Modest, Pullback In EC Survey

There was a welcomed pullback in 3-month ahead expected prices in the European Commission’s May business survey. The expected prices diffusion index declined by up to 3 points across industries, though all series remain firmly above respective 2025 average levels.

CTS Points To Faster Price Increases

The ECB's Corporate Telephone Survey released May 4, but only with interviews held between March 23 - April 1, noted that "the jump in the price of oil in March was being transmitted rapidly to selling prices for the most oil-dependent goods and services, but the broader pass-through might be more gradual than in the past. ". "If the war in the Middle East was not concluded soon, however, it was likely to induce supply chain disruption, putting significant further upward pressure on prices and curtailing demand.”
There wasn’t much to go off on the frequency of expected price changes.

Consumer inflation expectations steady in ECB’s April survey

It’s not one of the measures listed but consumer inflation expectations meanwhile were mostly steady in April, with the 1-year ahead median unchanged at 4.0%, while the 3-year ahead median dropped a touch to 2.9% (3.0% March).
Further ahead, 5-year consumer inflation expectations were unchanged at 2.4%. There was a jump in the median perceived inflation over the past year to 4.0% (from 3.5% March) - but the latter would be largely expected due to fuel prices rising.
Elsewhere in the survey, consumer income growth expectations over the next year decreased, while expected spending rose. Economic growth expectations became a little more negative at -2.2% (from -2.1%), while the expectation for mortgage rates was unchanged at 4.9%.
Meanwhile for the unemployment rate in the year ahead, the median expectation dropped slightly to 11.2% (11.3% Mar).

Jun-10 18:14

Eurozone HICP inflation at 3.19% Y/Y came in almost exactly in line with the 3.2% consensus in the flash May release as it accelerated from 3.03% in April.
However, core HICP was stronger than expected at 2.55% Y/Y, exceeding consensus of 2.4% and the 2.20% in April.
It was driven by a notable acceleration in services inflation from 2.97% to 3.46% Y/Y. While some anecdotal national-level data suggested that airfares inflation did start picking up in May after a low April Y/Y rate, the overall services pickup in today's is likely somewhat of a surprise although full details will only be released on Jun 17.
The ECB’s own seasonal adjustment meanwhile estimate core HICP of 0.36% M/M in May after 0.30% in April and 0.14% in March.
Services again led the increase, rising 0.49% M/M after 0.35% for its fastest monthly pace since Apr 20265, whilst core goods inflation moderated to 0.12% M/M after 0.20%. Caution is required when interpreting the services figure, with the energy price shock alongside Easter-timing base effects potentially influencing the seasonal adjustment process.
Taken at face value, 3m/3m annualised SA services momentum rose to 3.61% in May, an 11-month high. Meanwhile, core goods momentum inched higher again to 1.38% (vs 1.34% prior).

MNI INTERVIEW: Sept Hike Could Hinge On Warsh Speech - Sheets

Aug-25 16:32

MNI NBH Review - Aug'26: Another 25bp Cut, September Key

Aug-25 13:51

MNI POLICY: Spreads Hold As Norges Delivers On Certificates

Aug-25 11:21