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EGBs-GILTS CASH CLOSE: Bear Steepening On Strong US Inflation Data

BONDS

EGB and Gilt yields retraced some of the drop seen earlier in the week on Thursday after stronger-than-expected US September inflation data.

  • The European morning session saw some modest gains (Gilts benefited from softer-than-expected manufacturing data) that faded as oil prices and equities found a footing.
  • But trade was tentative ahead of US CPI data, which saw global core FI retreat sharply as the implications of unexpectedly strong core/supercore figures were digested. The selling momentum carried on through the cash close.
  • German and UK curves bear steepened on the day, with Gilts underperforming Bunds.
  • Periphery EGB spreads widened led by BTPs, having cheapened post-CPI and on ECB's Vasle calling for a debate to begin on shrinking the balance sheet.
  • The week concludes Friday with final Sept Eurozone CPI data and Eurozone industrial production for August, along with multiple central bank speakers once again including BoE's Bailey and ECB's Lagarde.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

  • Germany: The 2-Yr yield is up 5.3bps at 3.161%, 5-Yr is up 5.7bps at 2.716%, 10-Yr is up 6.8bps at 2.786%, and 30-Yr is up 7.6bps at 2.975%.
  • UK: The 2-Yr yield is up 5.3bps at 4.85%, 5-Yr is up 8.3bps at 4.471%, 10-Yr is up 9.5bps at 4.423%, and 30-Yr is up 9.6bps at 4.864%.
  • Italian BTP spread up 2.6bps at 197.7bps / Spanish up 1.4bps at 111.3bps
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