EGBs-GILTS CASH CLOSE: BoE Week Starts With UK Short End Underperformance

Stronger-than-expected Eurozone flash inflation sparked a further round of EGB weakness, though Schatz managed to outperform their UK counterparts amid a short-end pre-BoE Gilt selloff.

• EGB weakness continued as last week's dovish ECB narrative is reassessed (particularly in light of the above-expected 10.7% Y/Y rise in EZ CPI, alongside stonger-than-expected Q3 GDP prints).
• Bunds have nearly retraced the entire post-ECB rally, with bear steepening seen today.
• But the UK curve bear flattened as terminal UK rate pricing edged higher with an eye on Thursday's BoE decision, and amid hawkish repricing of central banks elsewhere (including the Fed whose decision is Wednesday).
• Peripheries underperformed, with BTP spreads widening nearly 9bp.

CLOSING YIELDS / 10-YR PERIPHERY EGB SPREADS TO GERMANY:

• Germany: The 2-Yr yield is down 0.3bps at 1.936%, 5-Yr is up 0.8bps at 2.005%, 10-Yr is up 3.9bps at 2.142%, and 30-Yr is up 5.7bps at 2.135%.
• UK: The 2-Yr yield is up 7.2bps at 3.333%, 5-Yr is up 4.9bps at 3.631%, 10-Yr is up 3.8bps at 3.516%, and 30-Yr is up 4.6bps at 3.608%.
• Italian BTP spread up 8.6bps at 215.8bps / Spanish up 3.4bps at 108.3bps