EGBs-GILTS CASH CLOSE: BTPs Underperform

While UK long-end weakness stood out again in Wednesday's core Europe FI sell-off, Italian BTPs were the overall underperformer.

• A strong US Services ISM reading, coming slightly after another zero-takeup BoE long-dated purchase operation, pushed yields to session highs in mid-afternoon European trade.
• 10Y BTP yields saw the biggest daily increase since March 2020, up just under 30bp, and now up 42bp from Tuesday's low.
• Multiple factors at play: Moody's warning the new Italian coalition's policies could lead to a ratings downgrade; some traders also pointed to the ECB's latest financial disclosure showing limited recent bond-buying support for the periphery.
• 30Y UK yields closed 12p below the low, but still posted the highest close in a week.

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

• Germany: The 2-Yr yield is up 12.1bps at 1.691%, 5-Yr is up 16.3bps at 1.87%, 10-Yr is up 16.3bps at 2.034%, and 30-Yr is up 12.2bps at 2.029%.
• UK: The 2-Yr yield is up 11.6bps at 4.036%, 5-Yr is up 14.2bps at 4.253%, 10-Yr is up 16bps at 4.035%, and 30-Yr is up 16.6bps at 4.204%.
• Italian BTP spread up 13.3bps at 244bps / Spanish bond spread up 4.5bps at 120.5bps