EGBs-GILTS CASH CLOSE: Broad Rally As Terminal Hike Pricing Pared Further

German yields dropped sharply Tuesday in a strong bull flattening move, while periphery EGBs maintained their solid performance ahead of the ECB meeting Thursday.

• Amid continued downward repricing of Federal Reserve hike expectations and further weak US housing data, global yields fell sharply alongside a weaker USD. Long-end Bunds outperformed, while UK 10Y yields were down by double-digits.
• BoE terminal rate pricing dropped by 6bp, closing below 5% for the first time since Sept 22, with Gilt markets calming further as ex-Chancellor Sunak officially became PM.
• ECB terminal hike pricing fell by around 10bp, though expectations for this week's decision were steady (92% chance ofa 75bp hike). MNI reported the ECB is set to make changes to the terms of TLTRO loans this Thursday.
• BTPs outperformed amid a broader risk-on rally.

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

• Germany: The 2-Yr yield is down 4bps at 1.969%, 5-Yr is down 11.9bps at 2.03%, 10-Yr is down 16.4bps at 2.166%, and 30-Yr is down 19.8bps at 2.139%.
• UK: The 2-Yr yield is down 1.4bps at 3.414%, 5-Yr is down 7.2bps at 3.75%, 10-Yr is down 11.2bps at 3.634%, and 30-Yr is down 8.8bps at 3.668%.
• Italian BTP spread down 5.7bps at 220.2bps / Greek down 0.7bps at 251.5bps