EGBs-GILTS CASH CLOSE: Bunds Outperform

European core FI rallied Tuesday with Bunds outperforming Gilts, and periphery spreads tightening.

• Bunds rallied from the start, with weaker-than-expected Spanish inflation data sending a dovish signal ahead of the remaining Eurozone CPI prints this week.
• They continued to strengthen steadily over the course of the session, helped by a strong BTP auction, and the reversal lower in equities in the afternoon helping underpin core bonds.
• The soft Spanish inflation reading induced a retracement in ECB hike pricing, with terminal rates envisaged 5bp lower than prior.
• Notably UK hike pricing was relatively steady, following on from last week's significant sell-off.
• Attention first thing Wednesday will be on German state and French inflation data.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 9.6bps at 2.784%, 5-Yr is down 10.4bps at 2.356%, 10-Yr is down 9.2bps at 2.342%, and 30-Yr is down 6.9bps at 2.499%.
• UK: The 2-Yr yield is down 5.6bps at 4.435%, 5-Yr is down 6.4bps at 4.211%, 10-Yr is down 8.7bps at 4.247%, and 30-Yr is down 5.9bps at 4.584%.
• Italian BTP spread down 3.4bps at 180.9bps / Spanish down 1.7bps at 104.6bps