EGBs-GILTS CASH CLOSE: 30Y UK Yield Falls 100bp As BoE Steps In

Gilts had a historic rally Wednesday after the BoE stepped in to the ongoing sell-off and re-launched bond purchases (if only temporarily) in order to quell market volatility.

• While yields across the UK curve fell, the 30Y dropped 106bp on the session, trading in a range of 3.874% - 5.142% (the latter a post-1998 high).
• The BoE emergency purchase operation itself was rather underwhelming, with the Bank accepting just over GBP1bln of the GBP5bln potential size - operations continue Thursday, to Oct 14.
• But overall, bond markets calmed down considerably, helping German yields fall across the curve as well, with the short-end strongest despite a parade of ECB speakers discussing a 75bp hike in October and eyeing getting to neutral by end-year.
• The relief rally helped BTPs turn it around today as well: 10Y spreads came off a post-Apr 2020 wide of 258bp to trade just below 241bp at the close.

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

• Germany: The 2-Yr yield is down 12.7bps at 1.856%, 5-Yr is down 14.2bps at 2.028%, 10-Yr is down 11.1bps at 2.12%, and 30-Yr is down 7.5bps at 2.017%.
• UK: The 2-Yr yield is down 35.4bps at 4.293%, 5-Yr is down 40.7bps at 4.292%, 10-Yr is down 49.4bps at 4.012%, and 30-Yr is down 105.6bps at 3.932%.
• Italian BTP spread down 11.7bps at 240.9bps / Spanish down 2.4bps at 118bps