EGBs-GILTS CASH CLOSE: Eyeing Overtightening Risks

UK and German yields saw little net change Thursday, coming off intraday highs set after stronger-than-expected US PPI data.

• Gilt and Bund yields hit the highest since early January before fading toward the close. Schatz yields set a fresh post-2008 high.
• Just after the close, BoE's Pill said there's a risk of overtightening rates, echoing comments by ECB's Panetta early in the session.
• However, ECB terminal rate expectations continued to climb (ECB nearing 3.70%), while BoE fell to a week low (Bank Rate seen peaking just below 4.50%).
• Periphery EGB spreads were steady.in a fairly heavy supply day including Italian 30Y syndication and a Spanish Obli auction.
• Attention first thing Friday will be on UK retail sales data.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 0.2bps at 2.881%, 5-Yr is up 0.8bps at 2.537%, 10-Yr is up 0.3bps at 2.478%, and 30-Yr is up 0.2bps at 2.436%.
• UK: The 2-Yr yield is up 0.5bps at 3.798%, 5-Yr is down 1.6bps at 3.41%, 10-Yr is up 1.2bps at 3.499%, and 30-Yr is up 2.6bps at 3.896%.
• Italian BTP spread down 0.1bps at 185.5bps / Spanish bond spread unchanged at 96.3bps