EGBs-GILTS CASH CLOSE: Bank Panic Spurs Record German Rally

German yields across most of the curve dropped the most on record Wednesday as concerns over Credit Suisse spurred further bank-related risk aversion.

• The session began with rates selling off on a Reuters piece pointing to a 50bp ECB hike Thursday (following MNI's / later BBG's reporting), but was quickly consumed by Europe financial sector panic as bank stocks sold off 7% and risk spreads (including BTP periphery bonds) widened.
• The focus was Credit Suisse whose shares collapsed 31% at the lows, as its largest investor said they wouldn't inject more cash into the troubled bank.
• By the end of the session, 2Y, 5Y, and 30Y Bund yields had dropped by a single-day record, with the curve bull steepening sharply as ECB hikes were priced out. That includes just 12% implied prob of a 50bp raise Thursday.
• The CS headlines overshadowed the UK Budget announcement, which held few surprises. Gilts easily underperformed Bunds, with modest bull steepening.
• Attention overnight will remain on any news related to Credit Suisse, ahead of the ECB decision Thursday.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 48.3bps at 2.409%, 5-Yr is down 37.5bps at 2.137%, 10-Yr is down 29bps at 2.13%, and 30-Yr is down 26.5bps at 2.145%.
• UK: The 2-Yr yield is down 18.9bps at 3.292%, 5-Yr is down 17.8bps at 3.214%, 10-Yr is down 16.7bps at 3.321%, and 30-Yr is down 13.9bps at 3.755%.
• Italian BTP spread up 13.6bps at 198.1bps / Greek up 18.9bps at 210.2bps