EGBs-GILTS CASH CLOSE: High UK CPI Hits Short-End Gilts Ahead Of BoE

Gilts bear flattened yet again Wednesday after a higher-than-expected UK inflation print pushed up Bank of England hike pricing for tomorrow and beyond.

• After core CPI came in at 7.1% (vs 6.8% survey), hike pricing for Thursday's BoE decision neared 50% of a 50bp (vs 25bp hike) before settling down (our preview published pre-CPI is here). Terminal Bank rate pricing remained above 6%.
• The UK cash curve in turn hit its flattest levels in post-open trade, partially reversing the move over the course of the session but ending up bear flatter on the day once again. 2s10s hit a fresh post-2000 low (-70.5bp before closing a little less inverted than that).
• Bunds easily outperformed Gilts, in turn, with the belly underperforming on the German curve.
• Periphery spreads tightened modestly, with Greece outperforming following a well-received GGB auction.
• Focus Thursday is of course on the BoE, though the SNB and Norges Bank decisions could also have an impact early in the session.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 2.6bps at 3.133%, 5-Yr is up 3.7bps at 2.562%, 10-Yr is up 3bps at 2.435%, and 30-Yr is down 0.6bps at 2.482%.
• UK: The 2-Yr yield is up 9.3bps at 5.046%, 5-Yr is up 8.2bps at 4.591%, 10-Yr is up 6.8bps at 4.405%, and 30-Yr is up 5.9bps at 4.513%.
• Italian BTP spread down 1bps at 161.6bps / Greek down 1.6bps at 130.4bps