EGBs-GILTS CASH CLOSE: Canadian Surprise Seals Pre-ECB Gains

European yields erased an intraday rise to finish lower Wednesday, with one eye on Thursday's ECB decision.

• Bunds and Gilts traded with a bullish tone early in a carry-over from Tuesday's price action, though sank in late morning as UK uncertainty returned with news that the Gov't medium term fiscal statement would be delayed from Oct 31 to Nov 17.
• Later, Bunds and Gilts surged to session highs following a surprise 50bp hike by the Bank of Canada (vs the 75bp expected), which advanced the narrative that global rate hike expectations may be overdone for now.
• Periphery spreads round-tripped, tightening early, widening by early afternoon, then falling back toward opening levels again by the close as the BoC decision ignited a global risk-on rally.
• Thursday's ECB decision remains the week's key focus, with a 75bp hike still very much the expectation - our MNI Markets Team preview is here, while our Policy Team reports that the Governing Council is likely to retroactively modify the conditions of TLTRO loans to banks.

CLOSING YIELDS / 10-YR PERIPHERY EGB SPREADS TO GERMANY:

• Germany: The 2-Yr yield is down 2.7bps at 1.945%, 5-Yr is down 3.8bps at 1.997%, 10-Yr is down 5.9bps at 2.111%, and 30-Yr is down 3.5bps at 2.107%.
• UK: The 2-Yr yield is down 13.9bps at 3.278%, 5-Yr is down 9bps at 3.663%, 10-Yr is down 6.1bps at 3.576%, and 30-Yr is up 0.6bps at 3.678%.
• Italian BTP spread up 1.1bps at 221.8bps / Greek up 1.4bps at 252.9bps