EGBs-GILTS CASH CLOSE: Long "Last Mile" For ECB Sees Bunds Weaken

European government bond yields closed weaker Wednesday, with Bund and Gilt yields retracing most of Tuesday's drop.

• Bunds were pressured early in the session after the FT published an interview with ECB's Schnabel who cited concern over the "last mile" of the fight against inflation. That spilled over into Gilt weakness.
• There was little impact from comments by BoE's Breeden who noted a focus on data dependence in the next few months while determining how long to hold rates.
• MNI published an interview with ECB's Simkus who noted cuts could start in April or June.
• Data showed German and Spanish industrial production ended 2023 on a weak note, but there was little reaction.
• The afternoon saw further gyrations stemming from US banking sector uncertainty, with NYCB headlines (and share price) in focus.
• The German curve bear flattened, with the UK's bear steepening. European equities closed flat/lower, mirrored by periphery EGB spreads closing modestly wider, with the exception of GGBs which saw some tightening.
• Thursday's focus will be ECB speakers including Lane, Vujcic and Wunsch, and BoE's Mann.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 3.5bps at 2.63%, 5-Yr is up 2.8bps at 2.243%, 10-Yr is up 2.4bps at 2.316%, and 30-Yr is up 3bps at 2.54%.
• UK: The 2-Yr yield is up 0.7bps at 4.477%, 5-Yr is up 1.9bps at 3.972%, 10-Yr is up 3.8bps at 3.988%, and 30-Yr is up 1.8bps at 4.57%.
• Italian BTP spread up 1bps at 157.3bps / Spanish up 0.5bps at 92.3bps