EGBs-GILTS CASH CLOSE: Peripheries Outperform

Gilt yields pushed to one-week highs Wednesday, underperforming Bunds, with curve bear flattening in the afternoon contrasting with earlier bull/twist flattening.

• The morning saw strong auctions for the UK, Germany and France, which along with mixed risk appetite (markets focused on US debt default potential) helping core instruments hit session's best levels by midday.
• An optimistic statement on debt limit negotiations by US Pres Biden pushed European yields to session highs in late afternoon, but the move faded.
• Periphery EGB spread narrowing, led by Greece, progressed steadily as risk appetite picked up with equities edging into positive territory.
• The main European data of the session - Eurozone final CPI - was mostly in line (M/M revised down 0.1pp), and had no market impact. Likewise, commentary by ECB's de Cos and de Guindos, and by BoE's Bailey, brought little new.
• Note that Thursday's Ascension Day holiday will likely see lighter trade volumes in a thin European calendar outside of central bank speakers (including ECB's Muller, and BoE's Pill and Bailey) and Spanish bond supply.

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

• Germany: The 2-Yr yield is up 4.4bps at 2.701%, 5-Yr is up 2.1bps at 2.327%, 10-Yr is down 1.7bps at 2.336%, and 30-Yr is down 3.8bps at 2.512%.
• UK: The 2-Yr yield is up 5.5bps at 3.867%, 5-Yr is up 6bps at 3.688%, 10-Yr is up 2.1bps at 3.837%, and 30-Yr is up 1.2bps at 4.269%.
• Italian BTP spread down 2.1bps at 184.7bps / Greek down 4.6bps at 166.3bps