EGBs-GILTS CASH CLOSE: ECB Hike Pricing Softens Despite 50bp Speculation

Having easily outperformed Tuesday, Gilts underperformed Bunds Wednesday as European curves steepened.

• Long-end yields moved in tandem with equities, falling to session lows mid-afternoon before rebounding late; but short-end yields maintained their drop.
• Monday's Lagarde blog post implying 25bp hikes in Jul and Sep was one of the main points of discussion; Knot said he "fully support[ed] everything that is in the blog" but went on to say that hiking 50bp in July is also compatible with the blog post.
• VP de Guindos didn't appear to totally dismiss a hike bigger than 25bp, stressing data dependence, while Panetta said normalisation should be done "gradually". In the end, ECB hike pricing moderated slightly on the day.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany:

• Germany: The 2-Yr yield is down 4.1bps at 0.34%, 5-Yr is down 3.1bps at 0.655%, 10-Yr is down 1.5bps at 0.952%, and 30-Yr is up 2.9bps at 1.197%.
• UK: The 2-Yr yield is down 2.3bps at 1.43%, 5-Yr is down 0.6bps at 1.56%, 10-Yr is up 2.3bps at 1.91%, and 30-Yr is up 2.9bps at 2.16%.
• Italian BTP spread down 1.2bps at 200.1bps / Spanish down 1.1bps at 110.9bps