EGBs-GILTS CASH CLOSE: Afternoon Retreat

Gilts and Bunds retreated Tuesday, with sideways-to-lower trading in the morning giving way to a more pronounced selloff in the afternoon.

• The weakness in core FI (led in the afternoon by US Treasuries) seemed to defy the data, with Italian and Spanish PMIs in the morning mostly reaffirming the weaker growth and inflation narrative (French / UK upward PMI revision and solid Eurozone jobs data were exceptions), and US JOLTS and ISM prices/employment data looking soft.
• Both the UK and German curves bear steepened, with Gilts underperforming.
• Periphery EGB spreads widened, reflecting a risk-off tone (Eurostoxx futures dropped 1.6% on the day).
• With most focus on risk events later in the week, including the BoE decision Thursday and the US employment report Friday, attention in a relatively quiet Wednesday schedule will be on the US Treasury's quarterly issuance announcement with potential for large supply increases.
• We published our Eurozone July inflation review today, and our BoE preview will be out tomorrow.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 2.6bps at 3.064%, 5-Yr is up 5bps at 2.586%, 10-Yr is up 6.5bps at 2.557%, and 30-Yr is up 7.1bps at 2.641%.
• UK: The 2-Yr yield is up 5.8bps at 5.058%, 5-Yr is up 8.4bps at 4.478%, 10-Yr is up 9bps at 4.399%, and 30-Yr is up 6.7bps at 4.529%.
• Italian BTP spread up 2.2bps at 163.2bps / Greek up 4.1bps at 131bps