EGBs-GILTS CASH CLOSE: Curves Flatten Post-UK CPI, Pre-ECB

The Gilts underperformed Wednesday after firmer-than-expected UK CPI data, with EGBs trading mixed ahead of Thursday's ECB decision.

• The UK curve bear flattened modestly after inflation aggregates came in above expected amid a "noisy" report.
• Trade was mixed for the rest of the session, with highs for yields hit in early afternoon on a 2nd consecutive day of solid US data (this time, housing starts).
• But sliding equities helped boost Bunds and Gilts toward the end of the session, with the German curve twist flattening and the UK's bear flattening.
• Periphery spreads widened modestly, mirroring the risk-off move in equities.
• Thursday kicks off with UK labour market data (MNI preview is here), with the ECB the focus of the session (preview here).

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 1.2bps at 2.775%, 5-Yr is up 0.4bps at 2.397%, 10-Yr is down 0.6bps at 2.421%, and 30-Yr is down 1.9bps at 2.597%.
• UK: The 2-Yr yield is up 3.2bps at 4.017%, 5-Yr is up 2.8bps at 3.915%, 10-Yr is up 2.7bps at 4.076%, and 30-Yr is up 1.8bps at 4.566%.
• Italian BTP spread up 2.5bps at 129.7bps / Spanish up 0.8bps at 77.5bps