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EGBs-GILTS CASH CLOSE: Long End Impresses As Oil Sinks

BONDS

European core FI rallied sharply Tuesday in a bull flattening move, with strong outperformance at the long end.

  • There were few macro catalysts evident in the session, with a weak German industrial production figure already telegraphed by Monday's factory orders data.
  • But Bunds and Gilts were boosted by a 3+% drop in oil prices, and overnight central bank developments including BoE chief economist Pill making remarks about possible mid-2024 rate cuts, and a dovishly-perceived RBA hike.
  • While UK instruments outperformed overall, 30Y German yields fell by the most in 3 months.
  • Portugal underperformed on the EGB periphery following the surprise resignation of Prime Minister Costa amid a corruption probe into his office and gov't ministries.
  • ECB's Nagel speaks after the cash close, with tomorrow's docket including Bund supply, German final CPI, Italian and Eurozone retail sales, the ECB's consumer expectations survey, and an appearance by BOE Gov Bailey.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

  • Germany: The 2-Yr yield is down 3.9bps at 2.984%, 5-Yr is down 5bps at 2.577%, 10-Yr is down 8.1bps at 2.658%, and 30-Yr is down 11.2bps at 2.894%.
  • UK: The 2-Yr yield is down 8.9bps at 4.632%, 5-Yr is down 8.5bps at 4.244%, 10-Yr is down 10.7bps at 4.27%, and 30-Yr is down 11.5bps at 4.737%.
  • Italian BTP spread down 1.3bps at 189.2bps / Portuguese up 2.5bps at 73.4bps

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