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EGB/Gilt: UK Consumer Confidence Reaches New Depths

BOND SUMMARY

European sovereign debt has sold off sharply alongside losses for equities and gains for the US dollar.

  • Following on the heels of another inflation surprise earlier in the week, UK consumer confidence has plumbed new depths with the GfK series sliding to -44 in August vs -42 consensus. UK retail sales data for July only narrowly missed expectations although continued to show a drop in spending (Inc Auto Fuel -3.4% Y/Y)
  • Gilts opened lower and, following some temporary respite early in the session, selling pressure resumed into late morning. Cash yields are now up 7-12bp with the curve bear steepening.
  • Bund yields are up 7-10bp with the 2s30s spread widening 3bp.
  • OAT yields are up 4-11bp on the day with the belly of the curve underperforming.
  • BTPs have underperformed core EGBs with teh curve bear flattening. Yields are up 8-13bp now while the 2s30s spread has traded down 5bp.
  • Supply this morning came from the UK (UKTBs, GBP3.5bn).
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