EGBs-GILTS CASH CLOSE: Bunds Underperform, BTPs And Gilts Rally

Gilts easily outperformed Bunds Tuesday.

• With few Europe-specific drivers to price action, focus was again on the prospect of central bank tightening cycles having already reached their conclusion amid an uncertain geopolitical backdrop.
• With limited data, and speakers not really bringing anything new (BoE's Mann late Monday, and ECB's Holzmann maintained characteristically hawkish tones), weakness across EGBs and Gilts through early afternoon was largely a function of a bounce in equities.
• For the 2nd consecutive session, though, early weakness reversed after the US cash equity open, with 10Y German yields falling 7bp from session highs and UK falling 10bp.
• On the day, the German curve twist flattened, with the UK's bull flattening.
• Periphery spreads tightened, led by BTP/Bund leading the way and crashing below 200bp amid positive risk appetite and limited prospects of further ECB tightening.
• Wednesday's data slate is thin (final German CPIs), with more focus on Bund and Gilt supply, speakers including ECB's Knot and Villeroy, and the ECB inflation expectations survey.

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

• Germany: The 2-Yr yield is up 3.1bps at 3.07%, 5-Yr is up 2.2bps at 2.665%, 10-Yr is up 0.3bps at 2.775%, and 30-Yr is down 1bps at 3.007%.
• UK: The 2-Yr yield is down 3.5bps at 4.799%, 5-Yr is down 4.8bps at 4.426%, 10-Yr is down 5bps at 4.426%, and 30-Yr is down 5.5bps at 4.919%.
• Italian BTP spread down 11.4bps at 195bps / Spanish down 4.8bps at 110.5bps