EGBs-GILTS CASH CLOSE: Long End Closes On A Weak Note

Gilts sold off sharply again Thursday with UK 10Y yields hitting the highest levels in 15 years, cheapening further vs Bunds as BoE hike pricing picked up.

• Both the UK and German curves bear steepened in a session with very limited data and newsflow, with overnight events including the slightly hawkish-leaning FOMC minutes and a terrible long-end Japanese bond auction weighing into the open.
• Periphery spreads were little changed, with Spanish bonds showing little reaction to a key parliamentary vote win by PM Sanchez (more here).
• As global rates sold off, BoE terminal hike pricing eclipsed 6.10% for the first time since early August, and 10Y Gilts closed at their widest spread to Bunds since Oct 2022, and the highest outright yield level since 2008.
• The yield rise at the end of the session into the cash close suggests potential anxiety over Friday's pre-open retail sales release, given the first 2 of the week's 3 key UK data points (CPI, wages) were more inflationary than expected.
• Other than that, the only key item on Friday's schedule is final Eurozone CPI.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 2.2bps at 3.107%, 5-Yr is up 4.1bps at 2.704%, 10-Yr is up 5.9bps at 2.709%, and 30-Yr is up 6.3bps at 2.792%.
• UK: The 2-Yr yield is up 7.3bps at 5.276%, 5-Yr is up 9.1bps at 4.755%, 10-Yr is up 10bps at 4.746%, and 30-Yr is up 9.8bps at 4.932%.
• Italian BTP spread up 0.3bps at 170.5bps / Spanish up 0.1bps at 105.1bps