EGBs-GILTS CASH CLOSE: OAT Spreads Continue To Tighten

Bund and Gilt yields fell modestly Tuesday, with semi-core/periphery EGB spreads tightening

• A flat-to-weaker morning for core FI in European trade - with June Eurozone flash inflation data coming in line with expectations - was followed by a decent rally in the afternoon with little discernable trigger.
• The bounce faded quickly after data showed surprisingly high US job openings.
• A panel appearance by ECB's Lagarde at the Sintra forum brought little new and had little impact on rate markets.
• The German curve twist steepened on the day, with the UK's bull flattening.
• EGB Periphery spreads tightened in a continuation of Monday's post-French election relief.
• Notably, French spreads continued compressing, with 10Y OAT in 2.7bp vs Bunds to a fresh post-June 13 low. Some desks cited reports of hundreds of candidates withdrawing from their runoff races ahead of the 2nd election round, in an effort to block far right gains.
• Wednesday sees final Services PMIs and Eurozone PPI, with multiple ECB speakers at Sintra.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 1.8bps at 2.906%, 5-Yr is down 0.8bps at 2.58%, 10-Yr is down 0.4bps at 2.603%, and 30-Yr is up 0.4bps at 2.799%.
• UK: The 2-Yr yield is down 0.9bps at 4.189%, 5-Yr is down 2.9bps at 4.081%, 10-Yr is down 3.3bps at 4.248%, and 30-Yr is down 2.8bps at 4.747%.
• Italian BTP spread down 4.6bps at 145.2bps / Greek down 5.5bps at 112bps