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EGBs-GILTS CASH CLOSE: Bobls Soar Amid Low German CPI And Risk-Off Move

BONDS

Mixed Eurozone inflation readings ultimately resolved in a bullish outcome for Bunds Wednesday, boosted by equity weakness. Periphery EGB spreads tightened.

  • Spanish June CPI unexpectedly hit a record high, but conversely, German inflation data came in much softer than expected (due in part to one-off factors).
  • Ultimately the weak German inflation data translated into a strong close for core EGBs, with Bobl outperforming on the curve.
  • Among much ECB speak (incl an MNI interview with Lithuania's Simkus), Lagarde said she was eyeing Friday's eurozone CPI data.
  • Gilts outperformed with some bull steepening; contributing was incoming BoE MPC member Dhingra's comments that she eyed a "gradual approach" to tightening.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany:

  • Germany: The 2-Yr yield is down 11.9bps at 0.838%, 5-Yr is down 15bps at 1.283%, 10-Yr is down 10.9bps at 1.519%, and 30-Yr is down 9bps at 1.738%.
  • UK: The 2-Yr yield is down 7.5bps at 2.041%, 5-Yr is down 6.7bps at 2.075%, 10-Yr is down 8bps at 2.385%, and 30-Yr is down 4.3bps at 2.669%.
  • Italian BTP spread down 5bps at 188.2bps / Spanish down 2.5bps at 107.2bps

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