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EGBs-GILTS CASH CLOSE: PM Truss Quits, So Does Gilt Rally


Gilts rallied into UK PM Truss's 1330UK resignation announcement, but weakened thereafter as political risks were weighed up and global core FI pulled back. The UK curve twist flattened, and in Germany, the belly underperformed.

  • After selling off on the open (China potentially easing Covid quarantine requirements for inbound travelers helped boost risk appetite), European yields headed lower over the course of the morning.
  • Gilts in particular were boosted by BoE's Broadbent who said risks to market hike pricing were more to the downside. This depressed terminal rate expectations, and the Gilt rally gained steam as it became clear Truss would resign.
  • But Bund and Gilt yields headed higher in the afternoon, no specific catalysts seen - largely regarded as fading the rally.
  • MNI's Politics Team looks at what's next for the UK; attention after hours turns to the BoE's announcement for the pace and timing of active gilt sales in Q4 (see our expectations here).

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

  • Germany: 2-Yr yield is up 2.6bps at 2.121%, 5-Yr is up 3.2bps at 2.245%, 10-Yr is up 2.8bps at 2.404%, and 30-Yr is up 2bps at 2.367%.
  • UK: 2-Yr yield is up 8.2bps at 3.588%, 5-Yr is up 9.5bps at 3.967%, 10-Yr is up 3.5bps at 3.913%, and 30-Yr is down 2.9bps at 3.96%.
  • Italian BTP spread down 4.7bps at 235bps / Spanish down 2.1bps at 112.9bps

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