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EGBs-GILTS CASH CLOSE: Early Inflation Relief Rally Fades

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Core Europe FI strengthened Tuesday, with Bunds outperforming Gilts, and some bull steepening in both the German and UK curves.

  • The German short end rallied early on softer-than-expected German state and Spanish inflation data diminishing ECB hike expectations (50bp is back to being the base case for Dec's meeting, with 75% implied probability).
  • Gains partially reversed in the afternoon. There was a negative reaction to the German HICP print which didn't confirm the weakness in State CPI, with heavy US corporate supply also weighing.
  • Wednesday's focus will be the Eurozone Nov flash inflation print.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

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Core Europe FI strengthened Tuesday, with Bunds outperforming Gilts, and some bull steepening in both the German and UK curves.

  • The German short end rallied early on softer-than-expected German state and Spanish inflation data diminishing ECB hike expectations (50bp is back to being the base case for Dec's meeting, with 75% implied probability).
  • Gains partially reversed in the afternoon. There was a negative reaction to the German HICP print which didn't confirm the weakness in State CPI, with heavy US corporate supply also weighing.
  • Wednesday's focus will be the Eurozone Nov flash inflation print.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

Keep reading...Show less