EGBs-GILTS CASH CLOSE: Core FI Partially Reverses Prior Gains

European yields picked up from early session lows to close higher Thursday, though not enough to reverse Wednesday's sharp US CPI-related fall.

• Gilts outperformed as BoE's Greene sounded less hawkish compared with previous appearances, appearing not to rule out voting for a June rate cut, depending on the data.
• Another round of mostly soft-ish US data led to a recovery rally in global core FI in early afternoon, but this quickly faded, with some focusing on an elevated US import price print.
• BoE cut pricing for 2024 briefly extended from 60bp Wednesday to 63bp, but this reversed, closing at 59bp - and a June cut remains an uncertain proposition (60% implied, was 64% at one point after Greene's comments).
• ECB cut pricing for 2024 retreated from around 74bp to 71bp, though roughly 30bp remains cumulatively priced through July (a June cut is 96% priced).
• While the UK curve bear flattened modestly on the day, Germany's was more mixed, with the belly underperforming. Periphery EGB spreads to Bunds tightened modestly.
• Friday's speaker highlights include BoE's Mann, while Eurozone final inflation features on the data docket.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 3.2bps at 2.927%, 5-Yr is up 4.3bps at 2.5%, 10-Yr is up 3.8bps at 2.46%, and 30-Yr is up 3.4bps at 2.606%.
• UK: The 2-Yr yield is up 3bps at 4.274%, 5-Yr is up 1.6bps at 3.966%, 10-Yr is up 1.3bps at 4.079%, and 30-Yr is up 1.6bps at 4.559%.
• Italian BTP spread down 1.3bps at 130bps / Spanish down 1.3bps at 75.9bps