EGBs-GILTS CASH CLOSE: Gilts Partially Recover Prior Session Losses

Gilts easily outperformed Bunds Thursday, with the short end strengthening slightly in both the UK and Germany in a steepening move.

• Earlier in the session, supply from Spain, France and Austria had weighed on EGBs.
• With headlines and data comparatively light in Europe (the ECB December meeting accounts somewhat hawkishly noted the "substantial" loosening of financial conditions), US releases had the most impact, including a stronger-than-expected jobless claims figure that presented the latest challenge to the 2024 rate-cut narrative.
• The German curve twist steepened on the day, with the UK's bull steepening.
• Gilt strength is more attributable to a rebound from Wednesday's sharp sell-off after above-expected UK CPI data. However, Gilts could only partially retrace those losses today.
• Periphery EGB spreads finished modestly tighter amid a constructive session for risk assets, with BTPs and GGBs leading.
• Retail sales rounds off a busy week for UK data first thing Friday morning, with German PPI released alongside.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 1.2bps at 2.686%, 5-Yr is up 1.2bps at 2.254%, 10-Yr is up 3.3bps at 2.349%, and 30-Yr is up 4.9bps at 2.518%.
• UK: The 2-Yr yield is down 8.1bps at 4.297%, 5-Yr is down 7.6bps at 3.831%, 10-Yr is down 5.5bps at 3.93%, and 30-Yr is down 4.7bps at 4.593%.
• Italian BTP spread down 2.3bps at 157.8bps / Greek down 2.8bps at 106.3bps