EGBs-GILTS CASH CLOSE: Bund Weakness Extends

Gilts easily outperformed Bunds Tuesday after weaker-than-expected UK labour market data spurred a reconsideration of potential BoE hikes.

• The early bullish move reversed and both German and UK yields closed at/near session highs, but implied BoE hikes (and the UK short end) didn't quite recover lost ground - terminal cumulative pricing was pared by 4bp to 41bp, with June pulling back 2bp to 19bp.
• Other than UK jobs, European data again had little impact: a weaker-than-expected German ZEW figure was worth a few ticks higher in Bunds - but 10Y German yields finished higher for the 3rd consecutive session..
• Periphery spreads were little changed. Following Monday's outperformance, GGBs underperformed - though spreads vs Bunds tightened slightly intraday after Wed's GGB auction announcement with size up to E400mln.
• Indeed supply looms large Wednesday, with France selling up to E11bln in OAT, UK GBP3.75bln of Gilt, and Germany E4bln of Bund.
• Apart from that, final Eurozone CPI and multiple ECB speakers feature.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 5.3bps at 2.657%, 5-Yr is up 6bps at 2.306%, 10-Yr is up 4.4bps at 2.353%, and 30-Yr is up 3.7bps at 2.55%.
• UK: The 2-Yr yield is down 1.4bps at 3.812%, 5-Yr is unchanged at 3.628%, 10-Yr is down 0.1bps at 3.816%, and 30-Yr is up 0.7bps at 4.257%.
• Italian BTP spread down 0.9bps at 186.8bps / Greek up 0.5bps at 170.9bps