EGBs-GILTS CASH CLOSE: Bear Flatter As Sintra Comments, US Data Weigh

Gilts led a European core FI sell-off Tuesday, with central bank hiking expectations rising.

• Both the German and UK curves bear flattened, with UK yields up double-digits through the 5Yr tenor as BoE peak rate pricing rose 6bp and exceeded 6.25%. ECB peak is again seen above 4% after a 4bp rise today.
• Rhetoric from the ECB's annual Sintra event has been mostly on the hawkish side. Highlights included Lagarde's comment that the ECB won’t be able to “state with full confidence” in the near future that the peak for rates has been reached; MNI interviewed Belgium's Wunsch in Sintra: he sees a September hike absent a fall in core inflation.
• Stronger-than-expected US data in the afternoon helped relieve recession concerns and cemented the European selloff into the cash close.
• Periphery EGB spreads tightened (combo of higher bund yields and a risk asset rally), with 10Y Greece/Germany at fresh post-2021 lows.
• Italy kicks off the June eurozone inflation readings Wednesday - our preview for that release and the EZ numbers was published today (available here). We also get commentary from BoE's Pill and Bailey.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 7.3bps at 3.16%, 5-Yr is up 6.7bps at 2.516%, 10-Yr is up 4.7bps at 2.356%, and 30-Yr is up 1.7bps at 2.391%.
• UK: The 2-Yr yield is up 11.3bps at 5.273%, 5-Yr is up 11.8bps at 4.675%, 10-Yr is up 7.4bps at 4.375%, and 30-Yr is down 0.9bps at 4.376%.
• Italian BTP spread down 1.3bps at 162.8bps / Greek down 1.9bps at 121.7bps