EGBs-GILTS CASH CLOSE: Post-Holiday Gilt Sell-Off

German bonds vastly outperformed the UK's Tuesday, though this was distorted by the return to Gilt cash trading from holidays.

• Overall it was a risk-on session in Europe with equities gaining and curves steepening.
• Gilts sold off sharply (vs Dec 31 levels), with short-end/belly yields rising to 2+ year highs. The 10Yr segment underperformed though, with yields up 11+bp (to 'just' 2-month highs).
• GBP strength vs EUR was notable, and largely attributable to a relatively more hawkish policy rate outlook in the UK vs Eurozone.
• Italian curve steepening was exacerbated by a syndication mandate for new 30Yr BTP.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 1.3bps at -0.613%, 5-Yr is down 0.7bps at -0.418%, 10-Yr is down 0.4bps at -0.122%, and 30-Yr is up 0.5bps at 0.257%.
• UK: The 2-Yr yield is up 8.1bps at 0.768%, 5-Yr is up 9.3bps at 0.913%, 10-Yr is up 11.4bps at 1.085%, and 30-Yr is up 9.5bps at 1.212%.
• Italian BTP spread up 1.3bps at 133.7bps / Spanish down 0.3bps at 71.2bps