EGBs-GILTS CASH CLOSE: Gilt Bull Flattening Continues

Gilt bull flattening continued Wednesday, with 30Y yields nearly erasing October's rise following overnight news that the BoE would not initially target longer-dated instruments in its upcoming QT operations.

• European bonds had sold off on the open following a slightly higher than expected UK inflation print, but diverged thereafter. Gilts rallied for almost the entire session, while German yields rose, with bear flattening in the curve.
• Bunds came under pressure after the German finance agency announced it would increase its bond holdings in order to make available more instruments for repo operations.
• German cash bond yields rose as swap spreads fell sharply, as the finance agency's move was seen easing long-standing repo market pressure.
• Periphery spreads were relatively steady.

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

• Germany: The 2-Yr yield is up 11.8bps at 2.095%, 5-Yr is up 12.3bps at 2.213%, 10-Yr is up 9.1bps at 2.376%, and 30-Yr is up 2.5bps at 2.347%.
• UK: The 2-Yr yield is down 6.2bps at 3.506%, 5-Yr is down 2.6bps at 3.872%, 10-Yr is down 7.2bps at 3.878%, and 30-Yr is down 31.7bps at 3.989%.
• Italian BTP spread down 1bps at 239.7bps / Spanish up 0.3bps at 115bps