EGBs-GILTS CASH CLOSE: Gilts Outperform With ECB Hawkishness In Focus

GIlts easily outperformed Bunds to start the week, with EGB periphery spreads trading mixed.

• With US markets closed for a holiday, and limited European data and central bank speakers, volumes were subdued.
• After trading steadily for most of the session, Bunds weakened in mid-afternoon into the close, following some moderately hawkish comments by ECB's Rehn.
• ECB hike expectations edged a few basis points higher, with the terminal rate seen above 3.7% by September (Of note, Goldman upped their peak call 25bp to 3.50% today as well.)
• Conversely, Gilts held up well with bull steepening in the curve, amid a strong APF sales operation with high bid-to-cover.
• February Flash PMIs are the expected highlight Tuesday.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 2.1bps at 2.898%, 5-Yr is up 3bps at 2.538%, 10-Yr is up 2.4bps at 2.464%, and 30-Yr is up 1.4bps at 2.409%.
• UK: The 2-Yr yield is down 4.8bps at 3.746%, 5-Yr is down 4.9bps at 3.384%, 10-Yr is down 4.4bps at 3.471%, and 30-Yr is down 3.8bps at 3.898%.
• Italian BTP spread up 0.9bps at 186.9bps / Spanish down 0.5bps at 96.4bps