EGBs-GILTS CASH CLOSE: Afternoon Sell-Off Sees Curves Bear Flatten

European curves bear flattened Wednesday, with core instruments selling off toward the end of the session.

• Bunds and Gilts began the day on the back foot but had yields dipped by midday - all within prior session's ranges. But from midday London time through the cash close, yields rose steadily, with bear flattening evident as the 2Y segment underperformed.
• The short-end move came alongside a fairly sharp repricing out of rate cut expectations: 2024 ECB implied reductions were pared to 100bp from 108bp at midday; the BoE equivalent shifted to 67bp from 74bp.
• Alongside the more hawkish central bank repricing, periphery spreads closed wider to Bunds, reversing earlier tightening.
• The afternoon move couldn't be pinned on any particular development. BoE MPC's Dhingra maintaining a dovish outlook at an MNI event, and Eurozone flash consumer confidence data coming in exactly in line with expectations.
• While ECB's Wunsch noted in an interview that "it may be too early to get our hopes up" on inflation and rate cuts, those comments were not out of line with his previous views and were published well after the rate selloff had begun.
• Attention early Thursday will be on flash February PMIs.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 8bps at 2.854%, 5-Yr is up 8.1bps at 2.426%, 10-Yr is up 7.7bps at 2.45%, and 30-Yr is up 5.5bps at 2.59%.
• UK: The 2-Yr yield is up 7.7bps at 4.634%, 5-Yr is up 8bps at 4.143%, 10-Yr is up 6.2bps at 4.103%, and 30-Yr is up 4.3bps at 4.635%.
• Italian BTP spread up 1.3bps at 150bps / Spanish bond spread up 0.9bps at 91.8bps