EGBs-GILTS CASH CLOSE: German Short-End Underperforms

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

• Germany: The 2-Yr yield is up 25.6bps at 2.617%, 5-Yr is up 21bps at 2.312%, 10-Yr is up 16.7bps at 2.292%, and 30-Yr is up 11.1bps at 2.319%.
• UK: The 2-Yr yield is up 5.4bps at 3.278%, 5-Yr is up 4.8bps at 3.216%, 10-Yr is up 5.7bps at 3.367%, and 30-Yr is up 2bps at 3.842%.
• Italian BTP spread down 3.9bps at 182.4bps / Greek down 7.2bps at 191bps