EGBs-GILTS CASH CLOSE: Inflation Fears Fade...For Now

Bunds and Gilts clawed back early sharp losses from around midday London time onward, with yields ultimately closing up but well off highs.

• This came against a backdrop of recovering equities, with US Data still inflationary (high PPI, low jobless claims) but not nearly the level of surprise of Wednesday's CPI, which fuelled the selloff.
• Curves have faded their steepening bias to trade fairly flat on the session.
• EGB periphery spreads mostly wider, Italy 3.0bps wider. Supply may have been a factor; Italy sold E9.25bln of BTPs; Ireland sold E1.5bln of IGBs).
• Ascension Day holiday in several countries (France, Germany, Netherlands and others) meant little data today.
• Friday sees little data (Spain final Apr CPI), and the ECB April meeting accounts.

Closing yields/10-Yr Spreads to Bunds:

• Germany: The 2-Yr yield is down 0.2bps at -0.658%, 5-Yr is up 0.6bps at -0.512%, 10-Yr is up 0.3bps at -0.12%, and 30-Yr is down 0.9bps at 0.437%.
• UK: The 2-Yr yield is down 0.2bps at 0.103%, 5-Yr is up 0.7bps at 0.409%, 10-Yr is up 1.2bps at 0.898%, and 30-Yr is up 1.3bps at 1.438%.
• Italian BTP spread up 3bps at 117.7bps / Spanish spread up 2.1bps at 70.6bps