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EGBs-GILTS CASH CLOSE: Core FI Falls Alongside Equities

BONDS

A rout in global equities (FTSE-2.5%, DAX -1.8%) did nothing to offset a big drop in core global FI, with Bunds and Gilts underperforming Treasuries amid strong bear steepening.

  • The overall risk-off tone was set early with tech stocks continuing to fall; but on the bond side it appeared to be more concern on the inflation / supply side of things that roiled markets, particularly ahead of Wednesday's key US CPI release.
  • Bund / Gilt yields closed near session highs, with curves on the steeps. Periphery EGBs largely contained though, with BTP spreads barely changed.
  • In data, German ZEW sentiment beat expectations (21-year high). No surprises in UK Queen's Speech.
  • In supply, today we got GBP4.5bn in Gilt sales, and German syndication of 30-Yr Green Bond.
  • Wednesday sees a Portugal OT auction, UK GDP, and some EZ Final CPI data.

Closing yields/10-Yr Spreads to Bunds:

  • Germany: The 2-Yr yield is up 1.8bps at -0.668%, 5-Yr is up 4.2bps at -0.549%, 10-Yr is up 5.1bps at -0.161%, and 30-Yr is up 4.9bps at 0.408%.
  • UK: The 2-Yr yield is up 2.6bps at 0.064%, 5-Yr is up 3.4bps at 0.355%, 10-Yr is up 4.5bps at 0.833%, and 30-Yr is up 5.9bps at 1.388%.
  • Italian BTP spread up 0.7bps at 114.7bps / Spanish spread up 0.3bps at 68.2bps
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