EGBs-GILTS CASH CLOSE: Pre-Fed Bear Flattening

European curves bear flattened ahead of the Federal Reserve decision after the cash close.

• A positive risk tone (equities green across the board) helped underpin Bund yields.
• In the last hour of the session, short-end yields sold off sharply, with some desks pointing a possible early release of the Rhineland-Palatinate July CPI (German state/national due out tomorrow) which showed a strong M/M reading.
• German 2s10s hit the flattest level since June 14.
• UK instruments underperformed beyond the short end, with the 10Y spread to Germany nearing the April high of 106.1bp.
• Italian spreads widened following Tuesday's downward S&P outlook revision.

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

• Germany: The 2-Yr yield is up 9.8bps at 0.444%, 5-Yr is up 4.6bps at 0.708%, 10-Yr is up 2.1bps at 0.946%, and 30-Yr is down 0.2bps at 1.198%.
• UK: The 2-Yr yield is up 5.2bps at 1.882%, 5-Yr is up 4.7bps at 1.732%, 10-Yr is up 4.4bps at 1.961%, and 30-Yr is up 4.7bps at 2.524%.
• Italian BTP spread up 6bps at 238.2bps / Spanish up 0.7bps at 119.3bps