EGBs-GILTS CASH CLOSE: Pre-BoE Short-End Gilt Rally Continues

Short-end Gilts rallied strongly again ahead of the BoE, leading to bull steepening in the UK curve Wednesday. The German curve twist flattened, while periphery EGBs were mixed.

• With global attention on the Federal Reserve meeting outcome after European hours Wednesday, volumes were on the light side and trading was mostly within limited ranges.
• 2Y Gilt yields stood out again, falling by double-digits for the second consecutive session - now off 26bp since Monday's close.
• BoE hike pricing slipped further down the rates strip but there is still around 88% of a 75bp (as opposed to 50bp) hike still priced for Thursday's decision, in line with MNI's preview.
• Not much change in ECB pricing, having already reversed most of last Thursday's bullish move in the past 3 sessions.
• BTPs underperformed on the EGB periphery with spreads slightly wider; GGBs tightened 1.5bp to Bunds.

CLOSING YIELDS / 10-YR PERIPHERY EGB SPREADS TO GERMANY:

• Germany: The 2-Yr yield is up 4.1bps at 1.982%, 5-Yr is up 4bps at 2.023%, 10-Yr is up 1bps at 2.141%, and 30-Yr is down 4.3bps at 2.097%.
• UK: The 2-Yr yield is down 12.7bps at 3.058%, 5-Yr is down 14.1bps at 3.363%, 10-Yr is down 7.1bps at 3.399%, and 30-Yr is down 1.5bps at 3.571%.
• Italian BTP spread up 2.5bps at 215.6bps / Greek down 1.5bps at 244.2bps