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EGBs-GILTS CASH CLOSE: German Short-End Underperforms

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The German short end underperformed across the global core FI space Tuesday, with 2Y Schatz yields rising the most in a single day since 2008 (just under 26bp).

  • The price action saw few headline drivers and was mostly steady through the session - it mainly reflected a resumption of Monday's retracement from panicked extremes following the weekend's UBS-Credit Suisse tie-up.
  • Such has been the magnitude of recent moves: though up over 50bp from Monday's lows, German 2Y yields remain 80bp below the month's highs.
  • Periphery spreads tightened alongside an equity relief rally.
  • Central bank hike expectations continued to retrace higher from the past week's lows, with end-year ECB pricing up 25bp on the session.
  • BoE pricing rose by 15bp though as our preview of Thursday's meeting points out, tomorrow's CPI will likely determine whether we get a hike or a hold.
  • Later Wednesday, the Federal Reserve decision takes centre stage.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

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The German short end underperformed across the global core FI space Tuesday, with 2Y Schatz yields rising the most in a single day since 2008 (just under 26bp).

  • The price action saw few headline drivers and was mostly steady through the session - it mainly reflected a resumption of Monday's retracement from panicked extremes following the weekend's UBS-Credit Suisse tie-up.
  • Such has been the magnitude of recent moves: though up over 50bp from Monday's lows, German 2Y yields remain 80bp below the month's highs.
  • Periphery spreads tightened alongside an equity relief rally.
  • Central bank hike expectations continued to retrace higher from the past week's lows, with end-year ECB pricing up 25bp on the session.
  • BoE pricing rose by 15bp though as our preview of Thursday's meeting points out, tomorrow's CPI will likely determine whether we get a hike or a hold.
  • Later Wednesday, the Federal Reserve decision takes centre stage.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

Keep reading...Show less