EGBs-GILTS CASH CLOSE: Gilts Outperform On Soft UK CPI

Gilts easily outperformed Bunds Wednesday, with European curves steeper and yields finishing well off session lows.

• UK yields fell sharply early on soft core CPI (2Y yields fell more than 14bp at the low) but stabilised and closed only slightly lower on the session, with strong US retail sales data contributing to the rebound.
• German yields were led lower early by Gilts, but retraced and finished higher across the curve. The 10Y Bund yield saw its highest close since Jan 2.
• EGB weakness mirrored a continued rise in ECB hike expectations (terminal depo rate now seen close to 3.70%, up 3bp) ahead of Pres Lagarde's appearance just after the cash close.
• BTPs underperformed, with spreads widening further after a 30Y syndication announcement in late afternoon (as had been anticipated by MNI).
• Thursday sees French and Spanish bond auctions, and multiple ECB speakers.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 2.5bps at 2.883%, 5-Yr is up 2.4bps at 2.529%, 10-Yr is up 3.7bps at 2.475%, and 30-Yr is up 5.6bps at 2.434%.
• UK: The 2-Yr yield is down 3.7bps at 3.793%, 5-Yr is down 8.4bps at 3.426%, 10-Yr is down 3.4bps at 3.487%, and 30-Yr is down 2bps at 3.87%.
• Italian BTP spread up 7bps at 185.6bps / Spanish up 3.6bps at 96.3bps