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EGBs-GILTS CASH CLOSE: Gilts Lag As US And UK Data Set The Tone


US and UK data dominated price action in European FI Tuesday, as key central bank decisions loomed large Wednesday and Thursday.

  • Global yields dropped sharply after US CPI surprised to the downside for the 2nd consecutive month.
  • Gilts underperformed, lagging the post-CPI rally and then more than reversing the drop as the afternoon progressed. Bunds also faded the initial move but yields finished the session lower.
  • Some of the Gilt underperformance was attributed to strong nominal UK wage growth data this morning and BoE's Bailey noting potential second-round inflation risks, ahead of Thursday's BoE decision (MNI's Preview here).
  • Periphery EGB spreads finished mostly tighter, but well off the session's narrowest levels posted amid a broad post-CPI risk rally.
  • UK CPI data features first thing Weds, with the Fed decision later in the day.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

  • Germany: The 2-Yr yield is down 5.1bps at 2.146%, 5-Yr is down 3.4bps at 1.944%, 10-Yr is down 1.4bps at 1.925%, and 30-Yr is up 3.5bps at 1.752%.
  • UK: The 2-Yr yield is up 5.4bps at 3.519%, 5-Yr is up 6.5bps at 3.344%, 10-Yr is up 10bps at 3.301%, and 30-Yr is up 10.5bps at 3.716%.
  • Italian BTP spread down 1.3bps at 187.6bps / Spanish down 1.6bps at 101bps

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