EGBs-GILTS CASH CLOSE: Bunds Underperform Again​

Bunds underperformed Gilts for a 2nd consecutive session Thursday, with European yields moving higher after the much-anticipated US CPI reading for July came in on the soft side of expectations.

• A typically quiet pre-US inflation report morning included a yield jump at the open on a broader risk-on move. But yields began sagging in the afternoon, amid a US-led bid.
• Shortly after the CPI release was digested, yields began resolving in an upward direction, with the move exacerbated by erstwhile Federal Reserve dove Daly noting after the data that the central bank had more work to do.
• The German curve bear steepened modestly on the day. The UK curve twist steepened as BoE hike expectations continued to fade, with the long-end trading more in tune with global core FI counterparts.
• Periphery spreads tightened, mirroring a risk-on rise in European equities.
• Final CPIs for the Netherlands, Portugal and Italy brought no major surprises.
• Friday's schedule brings UK GDP, and French and Spanish final July inflation.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 2.2bps at 2.984%, 5-Yr is up 3.4bps at 2.545%, 10-Yr is up 3.1bps at 2.528%, and 30-Yr is up 3.5bps at 2.625%.
• UK: The 2-Yr yield is down 2.1bps at 4.905%, 5-Yr is down 2.2bps at 4.39%, 10-Yr is down 0.1bps at 4.364%, and 30-Yr is up 1.3bps at 4.575%.
• Italian BTP spread down 3.2bps at 161.8bps / Greek down 2.2bps at 130.6bps