EGBs-GILTS CASH CLOSE: Gilts Underperform Amid Political Drama

Wednesday saw a fresh bout of recessionary-fear-fuelled rallies in core FI for most of the session, though yields reversed higher from mid-afternoon onward.

• It was a day of high drama in UK politics with PM Johnson seemingly under pressure to resign as we headed to the cash close, though political risk was very much a sideshow to global macro considerations.
• UK yields ended higher, with bear flattening in the curve: BoE's Pill and Cunliffe suggested they'd be willing to pursue faster rate hikes.
• German bonds outperformed with the curve twist steepening; periphery EGB spreads finished a little tighter after early widening.

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

• Germany: The 2-Yr yield is down 3.9bps at 0.393%, 5-Yr is down 4.8bps at 0.822%, 10-Yr is up 2.9bps at 1.208%, and 30-Yr is up 2.8bps at 1.525%.
• UK: The 2-Yr yield is up 7.4bps at 1.757%, 5-Yr is up 3.8bps at 1.75%, 10-Yr is up 4.7bps at 2.096%, and 30-Yr is up 7.7bps at 2.541%.
• Italian BTP spread down 3.1bps at 194.6bps / Spanish down 3.4bps at 107.3bps