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EGBs-GILTS CASH CLOSE: More Inflation Relief

BONDS

European bonds rallied sharply Wednesday, with periphery EGBs outperforming.

  • Below-expected French CPI added further confirmation to other recent data points (incl Germany yesterday) that eurozone inflation is past the peak.
  • While Bunds merely held their sizeable post-France CPI gains, Gilts strengthened steadily over the course of the session and ultimately outperformed.
  • With softer inflation dampening ECB tightening expectations (around 18bp removed from the depo rate hike path since the start of 2023, including 8bp today), peripheries benefited: BTP spreads fell over 10bp vs Bunds, closing just above the 200bp mark.
  • US Fed minutes are eyed after the cash close Wednesday; Thursday brings Italian CPI as a final prelude to Friday's Eurozone inflation reading.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

  • Germany: The 2-Yr yield is down 9.1bps at 2.579%, 5-Yr is down 12.3bps at 2.295%, 10-Yr is down 11.7bps at 2.272%, and 30-Yr is down 9.2bps at 2.221%.
  • UK: The 2-Yr yield is down 13.8bps at 3.457%, 5-Yr is down 13bps at 3.488%, 10-Yr is down 16bps at 3.491%, and 30-Yr is down 13.3bps at 3.821%.
  • Italian BTP spread down 10.5bps at 200.8bps / Spanish down 2.6bps at 104bps
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