EGBs-GILTS CASH CLOSE: Gilts Underperform On Strong UK Wage Data

Bunds and Gilts fell for the 2nd day this week as UK data and Fed speakers continued to apply pressure to the global rates space.

• MNI saw today's upside surprise in UK wage data (e.g. private sector 6.0%Y/Y in the 3 months to February vs consensus 5.8%) as pushing back on the idea of early BOE cuts, with May's MPC looking unlikely for the first cut - though June and particularly August very much in play.
• Fed Vice Chair Jefferson's warning that rates may have to remain higher for longer exacerbated the global FI selloff in the European afternoon.
• Eurozone data was less eventful, though a strong ZEW figure maintained downside pressure on Bunds. ECB speakers (including Lagarde) continued to point to a first rate cut in June.
• The divergence in UK/Euro policy rate expectations on the day (ECB implied 2024 cuts pared by 4bp, but BoE by 9bp) helps explain why the German curve bear steepened, while the UK's bear flattened. Periphery EGB spreads finished slightly wider.
• BoE's Bailey speaks after the cash close, while UK March inflation data is the early highlight on Wednesday - see MNI's preview here.

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

• Germany: The 2-Yr yield is up 2.4bps at 2.936%, 5-Yr is up 4.4bps at 2.485%, 10-Yr is up 4.6bps at 2.486%, and 30-Yr is up 3.9bps at 2.627%.
• UK: The 2-Yr yield is up 6.6bps at 4.476%, 5-Yr is up 6.7bps at 4.202%, 10-Yr is up 5.8bps at 4.299%, and 30-Yr is up 2.9bps at 4.749%.
• Italian BTP spread up 2.1bps at 145.9bps / Spanish up 0.7bps at 84.4bps