EGBs-GILTS CASH CLOSE: Gilts Outperform Ahead Of Key Data Points

Gilts outperformed Bunds Monday in a mixed session for core FI, with the German curve twist flattening and the UK's bull flattening.

• After a weak cash open gave way to a modest decline, European yields drifted up to hit session highs in mid-afternoon on speculation that the Japanese authorities had intervened to support the yen, though the move faded as that speculation died down. Trade was within last week's ranges.
• The German short-end underperformed, with ECB cut pricing pared slightly, though no particular catalyst.
• Largely unmoved by political developments (cabinet reshuffle) Gilt yields ticked above Friday's highs briefly before pulling back ahead of two key days of data ahead (labour market, CPI).
• BTP spreads tightened on the day but were buffeted by a couple of factors. These included a tightening move on the open as Fitch affirmed Italy's BBB/stable rating on Friday, and some modest widening on a BBG sources piece that noted Rome could have difficulty accessing a large chunk of EU recovery funds.
• Tuesday's busier docket includes UK labour market data, central bank speakers (ECB-speak from Lane and Villeroy, with BOE"s Dhingra and Pill also appearing)supply (EU syndication announced today, Schatz auction), Eurozone GDP and employment data, German ZEW, and the session's highlight: US CPI.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 1.5bps at 3.081%, 5-Yr is up 0.9bps at 2.664%, 10-Yr is down 0.4bps at 2.713%, and 30-Yr is down 1.8bps at 2.911%.
• UK: The 2-Yr yield is down 1bps at 4.661%, 5-Yr is down 0.4bps at 4.323%, 10-Yr is down 2.2bps at 4.314%, and 30-Yr is down 4.6bps at 4.735%.
• Italian BTP spread down 0.9bps at 185bps / Spanish / down 0.2bps at 105.4bps