EGBs-GILTS CASH CLOSE: Gilts Weaken As UK Issuance Seen Steady

Gilts underperformed Wednesday as UK bond issuance was not reduced for the 2023/24 fiscal year as much as had been expected.

• Yields opened higher after overnight developments (weak JGB Rinban operation, Israel's cabinet approving a hostage deal with Hamas), before falling in late morning ahead of the UK Autumn Statement and the final major US data of the holiday-shortened week.
• Bunds bounced off support at Tuesday's lows, with news of a delayed German 2024 budget being mulled, but GIlt yields began to pull away even further after the reduction in UK issuance plans from GBP237.8bln to GBP237.3bln was less than expected (MNI's preview saw a median sell-side expectation of GBP220.0bln).
• A higher revision to US UMichigan consumer inflation expectations and strong jobless claims also weighed on core FI.
• The details of the remit saw 10s30s steepen but the UK curve bear flattened on the day, with Germany's twist flattening. As short-end weakness on both curves implied, both the UK and Euro rate strips saw higher implieds, e.g.around 5bp fewer ECB/BoE rate cuts in 2024.
• Periphery spreads were little changed.
• Thursday's highlight is Nov flash PMIs, with some attention also on the Swedish Riksbank decision.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 4bps at 3.034%, 5-Yr is up 2.4bps at 2.545%, 10-Yr is down 0.6bps at 2.56%, and 30-Yr is down 3.2bps at 2.738%.
• UK: The 2-Yr yield is up 6.8bps at 4.613%, 5-Yr is up 6bps at 4.198%, 10-Yr is up 5bps at 4.155%, and 30-Yr is up 8.8bps at 4.625%.
• Italian BTP spread up 0.5bps at 175.6bps / Spanish down 0.1bps at 99.3bps