EGBs-GILTS CASH CLOSE: Gilts Rally Amid Big Issuance Reduction

Long-end Gilt yields fell by the most since March 2020 Wednesday, outperforming Bunds (which still saw one of the biggest rallies of 2021).

• Alongside today's UK budget release, DMO announced a reduction in Gilt issuance of GBP57.8bln in 2021-22 vs the amount projected in April, which was beyond even the biggest sell-side expectations.
• That accelerated a Gilt rally that started in the morning, with yields closing near the lows.
  
• Periphery EGBs couldn't quite keep pace with Bunds, leaving spreads a little wider. GGBs underperformed; Portugal weaker too amid continued political uncertainty and a short- for long-term bond exchange operation.
• Focus turns to flash October CPI and the ECB decision Thursday.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 1.3bps at -0.645%, 5-Yr is down 2.8bps at -0.469%, 10-Yr is down 6.3bps at -0.18%, and 30-Yr is down 8.9bps at 0.155%.
• UK: The 2-Yr yield is down 6.7bps at 0.559%, 5-Yr is down 9.8bps at 0.702%, 10-Yr is down 12.5bps at 0.985%, and 30-Yr is down 18bps at 1.136%.
• Italian BTP spread up 0.5bps at 111.8bps / Portuguese up 1.9bps at 55.2bps