EGBs-GILTS CASH CLOSE: German Yields Hit Fresh Multi-Month/Year Highs

Gilts outperformed Bunds Tuesday ahead of Wednesday's UK CPI data and the BoE decision Thursday.

• The UK curve leaned bull flatter through the 10Y tenor with Germany's marginally bear flattening.
• Despite little in the way of headline or data catalysts, German yields hit multi-month highs (2Y / 5Y since July, 10Y since March, 30Y since 2011), with weakness accelerating briefly after higher-than-expected Canadian inflation data in the European afternoon.
• ECB's Villeroy said the ECB will keep rates at 4% for as long as needed to achieve its inflation goals; ECB's Simkus told MNI that "barring any surprises, I don’t expect for us to need to think about another hike".
• Gilt yields in contrast closed near their session lows ahead of key flashpoints the next two days.
• Our Bank of England preview (PDF here) was published today: we discuss the data leading up to the expected 25bp rate hike decision Thursday, and the potential for changes to forward guidance.
• The key data of course is tomorrow morning's CPI report, for which the Services component will be key - MNI's UK inflation preview PDF here.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 3bps at 3.285%, 5-Yr is up 3.5bps at 2.77%, 10-Yr is up 3bps at 2.738%, and 30-Yr is up 2.3bps at 2.867%.
• UK: The 2-Yr yield is down 3.9bps at 4.994%, 5-Yr is down 4bps at 4.535%, 10-Yr is down 5.1bps at 4.34%, and 30-Yr is down 1.7bps at 4.714%.
• Italian BTP spread down 2.5bps at 177.9bps / Greek down 5.6bps at 139bps