EGBs-GILTS CASH CLOSE: Gilts Outperform On CPI Progress Ahead Of BoE

Gilts outperformed Bunds Wednesday, with soft UK and German inflation data a key theme ahead of the Fed and Bank of England decisions.

• UK inflation data came in slightly lower than expected. As we note in our UK Inflation Insight publication (here), given how close the print was to the Bank of England's forecast, MNI's Markets Team doesn't think there is a significant impact on tomorrow's MPC meeting.
• Nonetheless it spurred a jump in Gilts at the open which only slowly faded through the session, helping buoy the broader space. The UK curve leaned bull flatter on the day.
• While below-expected German PPI helped an early Bund bid, the German curve twist flattened Wednesday, with short-end rates broadly unchanged amid ECB speakers bringing little new on near-term policy (Lagarde, Lane and Schnabel).
• Periphery spreads widened again in a continued reversal of the sizeable compression seen earlier in the year, with BTPs underperforming.
• The Federal Reserve decision is the focus overnight, with a busy Thursday that includes the Bank of England (MNI's preview here, noting that the MPC vote split and guidance will be in focus) and flash March PMIs.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.6bps at 2.925%, 5-Yr is down 0.7bps at 2.446%, 10-Yr is down 1.8bps at 2.432%, and 30-Yr is down 2.2bps at 2.589%.
• UK: The 2-Yr yield is down 2.6bps at 4.234%, 5-Yr is down 3.9bps at 3.915%, 10-Yr is down 4.1bps at 4.016%, and 30-Yr is down 3.4bps at 4.479%.
• Italian BTP spread up 2.7bps at 128.1bps / Spanish up 1.5bps at 81.5bps