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EGBs-GILTS CASH CLOSE: Partial Reversal Of Post-US CPI Moves

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Wednesday afternoon saw a partial reversal of most of the previous 24 hours' post-US CPI moves, with the UK curve bull steepening and Germany's bull flattening.

  • Bund and Gilt yields were higher by midday, but faded amid apparent profit-taking/position squaring (2Y Schatz / UK had risen 16bp / 19bp from pre-US CPI), while equities gave up their nascent bounce.
  • UK short-end outperformed, on both a broad relief retracement for core FI, and below-expected UK inflation.
  • BoE hike pricing was little changed on the session, with the ECB terminal rate 1-2bp higher.
  • Re-widening of asset swap spreads vs EGBs continued to be a theme as collateral shortages continued to be assessed following the ECB's decision on deposit remuneration last week (a theme touched on by Chief Econ Lane today).
  • Periphery spreads were a little wider, though still well off the week's highs.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany:

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Wednesday afternoon saw a partial reversal of most of the previous 24 hours' post-US CPI moves, with the UK curve bull steepening and Germany's bull flattening.

  • Bund and Gilt yields were higher by midday, but faded amid apparent profit-taking/position squaring (2Y Schatz / UK had risen 16bp / 19bp from pre-US CPI), while equities gave up their nascent bounce.
  • UK short-end outperformed, on both a broad relief retracement for core FI, and below-expected UK inflation.
  • BoE hike pricing was little changed on the session, with the ECB terminal rate 1-2bp higher.
  • Re-widening of asset swap spreads vs EGBs continued to be a theme as collateral shortages continued to be assessed following the ECB's decision on deposit remuneration last week (a theme touched on by Chief Econ Lane today).
  • Periphery spreads were a little wider, though still well off the week's highs.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany:

Keep reading...Show less