EGBs-GILTS CASH CLOSE: Poor Start To A Short Week For Gilts

A poor, bear steepening start to a shortened week for Gilts, with Bunds weakening slightly and periphery spreads tighter Tuesday.

• Gilts bear steepened on the return to trading after the long weekend. They were underpinned early in part by 3rd COVID wave concern, but underperformed in the afternoon following a poor long-dated APF (offer-to-cover 2.78x).
• Heavy Eurex future roll volumes (around half of front-month volume was spread related).
• The morning's data put the focus on strong activity and inflationary pressures, including strong Italian and Spanish PMIs, Italy Q1 GDP revised from contraction to expansion, and 2.0% Y/Y flash Eurozone inflation. Germany sold E0.8bln of linkers.
• On Wednesday, UK sells GBP4.75bln of Gilts; Germany sells E4bln of Bobl.

Closing German/UK Yields And 10-Yr Spreads To Germany

• Germany: The 2-Yr yield is up 0.3bps at -0.659%, 5-Yr is up 0.3bps at -0.564%, 10-Yr is up 0.9bps at -0.178%, and 30-Yr is up 1.5bps at 0.382%.
• UK: The 2-Yr yield is up 0.7bps at 0.07%, 5-Yr is up 1.7bps at 0.359%, 10-Yr is up 3.1bps at 0.826%, and 30-Yr is up 4.1bps at 1.345%.
• Italian BTP spread down 1.7bps at 107.9bps/ Spanish spread down 0.3bps at 64.7bps