EGBs-GILTS CASH CLOSE: Inflation Concerns

The German curve bear steepened sharply Monday, underperforming Gilts as Thursday's ECB and BoE decisions came into closer focus.

• Stronger-than-expected Spanish Jan flash inflation data was followed later by robust Belgian CPI data. Despite methodological questions as to how representative those releases were for the Eurozone as a whole, there is no doubt they set a bearish tone for European rates.
• But Wednesday's Eurozone CPI data was clouded further as Germany postponed its scheduled Tuesday release, meaning the Eurozone data will use only an estimation of German data.
• Nonetheless, today's CPI data further cemented pricing for a 50bp ECB hike Thursday; we published our meeting preview today.
• BTP spreads widened modestly. Greek bonds outperformed the space overall, following their ratings upgrade from Fitch after Friday's close.
• With German CPI delayed, attention early Tuesday is on French inflation.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 9.9bps at 2.679%, 5-Yr is up 9.5bps at 2.353%, 10-Yr is up 7.9bps at 2.318%, and 30-Yr is up 4.9bps at 2.244%.
• UK: The 2-Yr yield is down 0.3bps at 3.471%, 5-Yr is up 1.9bps at 3.22%, 10-Yr is up 1.3bps at 3.336%, and 30-Yr is up 1bps at 3.691%.
• Italian BTP spread up 2.3bps at 188.1bps / Greek down 1.9bps at 199.7bps