EGBs-GILTS CASH CLOSE: BTPs Blow Out While UK Short End Underperforms

BTPs underperformed the European space as a whole Tuesday, while Gilts weakened vs Bunds.

• Widening BTP spreads (10Y yields rose the most since Jun 14, up 20+bp at session highs) couldn't be pinned to any particular catalyst but political risk ahead of September elections and thin trading volumes contributed.
• The Gilt curve bear flattened with 2Y yields briefly hitting 2-month highs; some desks cited strong wage pressures in this morning's employment report potentially encouraging more BoE hikes.
• Supply consisted of Bobl and Gilt, little reaction. The only remaining auction this week is France (Thurs).
• UK July CPI takes centre stage Wednesday, with Eurozone GDP up later in the morning.

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

• Germany: The 2-Yr yield is up 4.7bps at 0.577%, 5-Yr is up 6.6bps at 0.744%, 10-Yr is up 7.1bps at 0.971%, and 30-Yr is up 7.5bps at 1.23%.
• UK: The 2-Yr yield is up 12.3bps at 2.155%, 5-Yr is up 11bps at 1.965%, 10-Yr is up 10.8bps at 2.125%, and 30-Yr is up 8bps at 2.515%.
• Italian BTP spread up 8.8bps at 216.3bps / Greek up 7.6bps at 236.5bps