EGBs-GILTS CASH CLOSE: All Gilt Bets Are Off Ahead Of CPI

Gilts led a global bond rally Tuesday, with caution receding ahead of Wednesday's pre-market UK CPI reading.

• The UK belly outperformed with yields across the curve down double-digits in the biggest rally since March. 2s reversed yesterday's losses; 10s were back to the same yield levels of 6 sessions ago after the key 4.50% level held firm.
• Some desks cited possible short covering (MNI's Europe Pi noted Gilts had been in structural short positioning), with CPI Weds and the BoE decision Thursday eyed - our preview will be published later today.
• The German curve bull flattened, helped by German PPI coming in below consensus, with 10-30Y yields down over 10bp. With the short end / ECB hike pricing anchored, 2s10s hit the most inverted level since 1992.
• ECB's Simkus told an MNI event that “I would in no way be surprised" if the ECB opted to hike in September, with a July hike already "pretty much clear".
• EGB periphery spreads widened amid a broader risk-off asset move, with Portugal underperforming.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 5.3bps at 3.107%, 5-Yr is down 9.5bps at 2.525%, 10-Yr is down 11.2bps at 2.405%, and 30-Yr is down 11.1bps at 2.488%.
• UK: The 2-Yr yield is down 13bps at 4.953%, 5-Yr is down 17.6bps at 4.509%, 10-Yr is down 15.5bps at 4.337%, and 30-Yr is down 10.3bps at 4.454%.
• Italian BTP spread up 2.2bps at 162.6bps / Portuguese up 2.4bps at 66.7bps