EGBs-GILTS CASH CLOSE: Bunds Gain Ahead Of Eurozone Inflation Data

Bunds easily outperformed the rest of the European FI space Wednesday, ahead of Eurozone inflation data in the upcoming two sessions.

• After a slightly weak start, Bunds gained for most of the session, with Gilts catching up to some extent toward the cash close as global equity futures plumbed session lows. No discernable themes prevailed through the session.
• The belly outperformed on the German curve (Bobl yields down over 5bp), with some bull steepening evident in the UK.
• Periphery spreads widened amid a slightly risk-off atmosphere, but closed off the widest levels of the session: notably 10Y BTP/Bund held below the 170bp level.
• Following the Federal Reserve meeting minutes after the European market close, attention will quickly turn to German state inflation data Thursday morning, starting with NRW at 0630UK time.
• MNI's preview of Eurozone December inflation went out today (PDF here) - in short, a resurgence in energy prices is expected to drive a reacceleration in headline inflation in Friday's Euro area release, but core is seen softening led by weaker goods prices (service disinflation is seen to be limited at best).

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 3.9bps at 2.414%, 5-Yr is down 5.1bps at 1.943%, 10-Yr is down 4.4bps at 2.024%, and 30-Yr is down 3.4bps at 2.278%.
• UK: The 2-Yr yield is up 4.9bps at 4.103%, 5-Yr is up 3.7bps at 3.58%, 10-Yr is up 0.1bps at 3.639%, and 30-Yr is up 2.5bps at 4.294%.
• Italian BTP spread up 3.2bps at 167.8bps / Spanish up 2.5bps at 98.4bps