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EGBs-GILTS CASH CLOSE: Gilts Underperform As Short-End Weakens Pre-Fed


European curves twist flattened Wednesday with the short end underperforming ahead of the Federal Reserve decision later in the evening.

  • After core instruments gained early on a safe-haven bid with Russia-Ukraine tensions in focus, short-end yields / STIR implied rates rose for the rest of the session, exacerbated by higher US terminal rate pricing going into the much-anticipated Fed meeting.
  • Some segments of the German and UK curves reached multi-year flats, with German 5s30s inverting for the first time since 2008.
  • Most of the UK curve underperformed, with the government's energy price support scheme for businesses coming in largely in line with expectations, and focus turning to Fed/BoE Thursday/fiscal announcements Friday.
  • Periphery EGBs traded mixed, with BTP spreads narrowing as broader equities gained.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany:

  • Germany: The 2-Yr yield is up 4.6bps at 1.759%, 5-Yr is up 1.5bps at 1.839%, 10-Yr is down 3.3bps at 1.893%, and 30-Yr is down 8.3bps at 1.838%.
  • UK: The 2-Yr yield is up 6.4bps at 3.39%, 5-Yr is up 7.4bps at 3.38%, 10-Yr is up 2.1bps at 3.311%, and 30-Yr is down 0.1bps at 3.589%.
  • Italian BTP spread down 2.3bps at 224.2bps / Greek up 2.9bps at 256.9bps

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