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EGBs-GILTS CASH CLOSE: Rally As UK Gov't Follows Through With U-Turn


The UK curve saw massive bull flattening Monday, with Gilts easily outperforming their global counterparts as the government followed through with the anticipated "U-turn" on its fiscal programme.

  • 10Y Gilt yields saw the 2nd biggest drop since 1992 (only September 28th's 49bp drop surpassed it).
  • Terminal BoE pricing fell by over 50bp (now seen around 5.1-5.2% in mid-2023, vs 100bp above that as recently as late September).
  • German yields saw a solid drop with bull flattening as well, but unremarkable in comparison with the UK move.
  • Periphery EGB spreads mostly narrowed in a risk-on session.
  • ECB's Nagel speaks after the market close.

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

  • Germany: The 2-Yr yield is down 0.2bps at 1.954%, 5-Yr is down 3.4bps at 2.08%, 10-Yr is down 7.7bps at 2.269%, and 30-Yr is down 10.5bps at 2.294%.
  • UK: The 2-Yr yield is down 32.7bps at 3.589%, 5-Yr is down 37.6bps at 3.942%, 10-Yr is down 35.8bps at 3.977%, and 30-Yr is down 40.6bps at 4.378%.
  • Italian BTP spread down 5.6bps at 238.8bps / Greek up 6.9bps at 267bps

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