EGBs-GILTS CASH CLOSE: Gilts Rally Despite Robust Inflation Data

Gilts outperformed Bunds Wednesday despite stronger-than-expected UK CPI data

• An initial post-UKI CPI sell off in Gilts proved limited and yields began heading decisively lower in the early afternoon.
• Overall the gains in core FI were more of a bounce from extreme weakness earlier in the week, with a risk-off tone and softer energy prices also contributing.
• BoE's Greene sounded slightly more dovish on the inflation situation than expected.
• The German and UK curves bull flattened, with Gilt yields closing on the lows as equities faded in late afternoon and BoE Gov Bailey commented that inflation was due for a "strong drop".
• Periphery spreads closed tighter on the day, led by BTPs.
• Multiple speakers feature Thursday, including ECB's Nagel.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.8bps at 2.944%, 5-Yr is down 1bps at 2.475%, 10-Yr is down 2.1bps at 2.465%, and 30-Yr is down 2.8bps at 2.599%.
• UK: The 2-Yr yield is down 1.3bps at 4.463%, 5-Yr is down 1.7bps at 4.185%, 10-Yr is down 3.8bps at 4.261%, and 30-Yr is down 5.5bps at 4.694%.
• Italian BTP spread down 1.4bps at 144.5bps / Spanish bond spread down 0.6bps at 83.8bps