EGBs-GILTS CASH CLOSE: Gilts Outperform After UK CPI Miss

Gilts outperformed global peers Wednesday as UK inflation data came in softer than expected.

• Core instruments strengthened in early trade after UK July CPI aggregates came in lower than expected, though the print didn't look as soft once volatile components (eg airfares) were excluded, and the initial rally faded.
• Later on in the session, US CPI came in largely in line with expectations, initially triggering a dovish reaction in global core FI which quickly reversed, but overall its impact on price action was neutral.
• The German curve twist flattened, with the UK curve bull flattening. 10Y Gilt yields saw their lowest close since Feb 1.
• Periphery EGB spreads closed mixed, with BTPs outperforming and GGBs underperforming in a fairly directionless day for risk assets.
• The UK data parade continues Thursday with Q2 GDP data; the schedule also includes the Norges Bank decision.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 1.4bps at 2.354%, 5-Yr is up 0.1bps at 2.092%, 10-Yr is down 0.6bps at 2.18%, and 30-Yr is down 0.5bps at 2.423%.
• UK: The 2-Yr yield is down 3.9bps at 3.566%, 5-Yr is down 6.3bps at 3.617%, 10-Yr is down 6.3bps at 3.825%, and 30-Yr is down 6.7bps at 4.402%.
• Italian BTP spread down 0.6bps at 138.4bps / Spanish down 0.4bps at 84bps