EGBs-GILTS CASH CLOSE: Gilts Lead Broad Decline

European core FI sold off Monday, led by Gilts, with periphery EGBs putting in a mixed performance.

• Gilt yields soared following late Friday's BoE bond sale announcement and reports of potential energy cap pledges for businesses through 2024 The curve bear flattened sharply.
• The German curve bear steepened. Stronger-than-expected German IFO data contributed to the weak tone, with ECB speakers including de Guindos repeating last week's meeting message that 50bp hikes would be ongoing.
• On the EU level, we got supply plans from for H1 2023 (E80bln) and agreement on a gas price cap of E180/MWh. We also got EFSF / ESM 2023 funding plans.
• BTPs underperformed, with spreads widening once again in tandem with higher ECB terminal rate expectations.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 1.5bps at 2.44%, 5-Yr is up 1.9bps at 2.239%, 10-Yr is up 5.1bps at 2.203%, and 30-Yr is up 7.6bps at 2.063%.
• UK: The 2-Yr yield is up 20bps at 3.687%, 5-Yr is up 18.3bps at 3.491%, 10-Yr is up 17.3bps at 3.502%, and 30-Yr is up 15.2bps at 3.824%.
• Italian BTP spread up 3.4bps at 217.9bps / Spanish down 0.9bps at 108.8bps