EGBs-GILTS CASH CLOSE: Late Retreat

European yields rose modestly Tuesday, with the German and UK curves leaning bear steeper.

• After mixed European data in the morning (strong German ZEW, vs soft ECB consumer inflation expectations and UK wage data), Bunds and Gilts looked to be headed for a constructive session through late afternoon trade.
• However a speech by Federal Reserve Governor Waller an hour before the cash close was seen as limiting the scope for a Fed rate cut by March, and this pulled core European FI back from levels that were at/near session highs.
• The pullback in bond futures extended after the cash close by the latest ECB speaker pushback against aggressive market rate cut pricing, this time by Lithuania's Simkus.
• Periphery spreads finished largely unchanged, having tightened to Bunds earlier in the session.
• Wednesday brings the day's highlight first thing in the form of UK inflation data (MNI's preview is here). Eurozone data later in the morning is the December final.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.2bps at 2.6%, 5-Yr is up 1.2bps at 2.154%, 10-Yr is up 2.5bps at 2.258%, and 30-Yr is up 3bps at 2.465%.
• UK: The 2-Yr yield is up 0.2bps at 4.163%, 5-Yr is unchanged at 3.67%, 10-Yr is unchanged at 3.797%, and 30-Yr is up 3.4bps at 4.485%.
• Italian BTP spread down 0.1bps at 157.2bps / Spanish up 0.2bps at 92.1bps