EGBs-GILTS CASH CLOSE: Early Rout Fades

Gilt and Bund yields pulled back from session highs but finished up Tuesday, with the German curve leaning bear steeper and the UK's bear flatter.

• The catalyst for the early sell-off was much higher than expected UK earnings data (albeit the rest of the labour market report was more mixed) which sent 10Y Gilt yields to the highest in a month, and Bund yields to post-March highs.
• The UK short end sold off sharply amid a jump in BoE hike pricing to a terminal rate above 6%, while periphery EGB spreads widened, led by BTPs.
• But yields peaked in early afternoon after strong US retail sales data and pulled back steadily thereafter to close around opening levels (though above Monday's closing prints). No obvious reason for the reversal but European bonds followed US Treasuries' suit, with some desks suggesting short covering after the retail data, and ahead of further UK data risk this week.
• Indeed the schedule provides little little let-up, with UK CPI data out first thing Wednesday morning (Eurozone economic data including Industrial Production and GDP will be of lesser importance).

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 3.2bps at 3.11%, 5-Yr is up 3.5bps at 2.687%, 10-Yr is up 3.5bps at 2.672%, and 30-Yr is up 3.8bps at 2.747%.
• UK: The 2-Yr yield is up 5.6bps at 5.137%, 5-Yr is up 2.4bps at 4.595%, 10-Yr is up 2.3bps at 4.589%, and 30-Yr is up 2.5bps at 4.778%.
• Italian BTP spread up 4.2bps at 168.4bps / Greek up 3.8bps at 129.8bps