EGBs-GILTS CASH CLOSE: Hawks Take Flight (Then Take Profit)

The UK curve underperformed Germany's Thursday, with bear steepening and multi-year highs set in long-end yields.

• The sell-off came mostly in the early morning/open following the hawkish reaction to Wednesday's Federal Reserve minutes which helped boost global rate hike expectations.
• Indeed, we saw some apparent profit-taking by bond shorts in the afternoon.
• 10Y and 30Y Gilt yields underperformed and hit fresh post-Oct 2021 highs. But short-end /belly UK instruments took centre stage, with 2Y and 5Y yields hitting highest since Mar 2019 (0.827% / 0.981% intraday highs respectively).
• Attention turns to the U.S. again Friday, for the Dec nonfarm payrolls report.

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

• Germany: The 2-Yr yield is up 2.1bps at -0.599%, 5-Yr is up 3.1bps at -0.4%, 10-Yr is up 2.3bps at -0.061%, and 30-Yr is up 0.4bps at 0.266%.
• UK: The 2-Yr yield is up 5.1bps at 0.813%, 5-Yr is up 5.6bps at 0.973%, 10-Yr is up 6.9bps at 1.156%, and 30-Yr is up 7.3bps at 1.275%.
• Italian BTP spread up 1.5bps at 133.4bps / Spanish up 0.2bps at 68.4bps