BONDS: EGBs-GILTS CASH CLOSE: UK Short End / Belly Underperforms

UK yields rose sharply Tuesday, with Bunds/periphery EGBs weakening.

• UK labour market data was the early session focus, and showed slightly stronger wages but slightly softer quantity data, with our macro team suggesting that the readings shouldn't really change any of the MPC voting intentions. Later in the morning, comments by BoE chief economist Pill saw little reaction.
• Overall though the central driving theme to global markets was the post-US election shift toward higher inflation expectations and US Treasury yields, which weighed once again across EGBs and Gilts.
• ECB and BoE pricing saw a slight bias toward fewer cuts (1-3bp) further into 2025, more pronounced in the UK which weighed on the short end of the curve.
• The UK curve bear flattened overall, with the belly slightly underperforming, with Germany's twist steepening.
• Periphery EGB spreads widened modestly, with an early tightening move fully reversed in the afternoon as equities retreated.
• The global focus Wednesday will be on US CPI, with the European calendar including French labour market data and an appearance by BOE's Mann.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany