EGBs-GILTS CASH CLOSE: Post-US CPI Gains Fade

Bunds and Gilts pared gains made immediately after the highly-anticipated US CPI report came exactly in line with expectations, though finished stronger on the session, with curve bellies outperforming.

• After the CPI release, 10Y Bund yields dipped below 2.10% with Gilts dropping below 3.30%, both reaching those levels for the first time since mid Dec.
• 10Y BTP spreads hit the tightest vs Bunds (177.3bp) since April 2022, 5+bp narrower at one point, before reversing course and finishing slightly wider.
• While US rate hike expectations faded, ECB pricing remained resilient and even ticked higher post-CPI, with some attributing the move to a media report citing sources saying growth resilience favours hawkish policy.
• Conversely, Gilts outperformed as under 100bp of further BoE hikes are now expected over the course of the cycle - no particular catalyst Thursday.
• Friday morning begins with UK GDP data.

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

• Germany: The 2-Yr yield is down 2.9bps at 2.559%, 5-Yr is down 4.3bps at 2.179%, 10-Yr is down 4.5bps at 2.159%, and 30-Yr is down 3bps at 2.109%.
• UK: The 2-Yr yield is down 9.2bps at 3.438%, 5-Yr is down 9.6bps at 3.239%, 10-Yr is down 7.5bps at 3.334%, and 30-Yr is down 6.2bps at 3.694%.
• Italian BTP spread up 1bps at 184.1bps / Spanish up 0.2bps at 98.6bps