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EGBs-GILTS CASH CLOSE: Rate Cut Pricing Pared With EZ Inflation Ahead

BONDS

Bunds and Gilts broke a 5-day streak of gains Monday, ahead of Eurozone inflation data later in the week.

  • The pullback in core FI was fairly steady through a quiet session, with a moderate spike in oil prices in the afternoon continuing to apply pressure into the final hours of the cash session.
  • An appearance by BoE's Mann - who voted for a pause with the MPC consensus last week, vs a hawkish dissent prior - brought little market reaction, with 2024 BoE cut pricing ending the session around 76bp (around 6bp less than Friday's close).
  • With ECB end-2024 rate pricing also pared (around 3bp less, to 89bp), the German and UK curves bear flattened on the day amid short-end weakness.
  • Periphery spreads erased earlier modest widening to finish flat/tighter to Bunds.
  • Data was decidedly second-tier, with Finnish and Spanish PPI showing further disinflationary impulses ahead of flash March Eurozone CPI readings later in the week (Spain Wednesday).
  • That data will be the holiday-shortened week's focus: MNI's preview will be published Tuesday.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

  • Germany: The 2-Yr yield is up 5.8bps at 2.885%, 5-Yr is up 5.6bps at 2.389%, 10-Yr is up 4.9bps at 2.372%, and 30-Yr is up 3.2bps at 2.526%.
  • UK: The 2-Yr yield is up 6.2bps at 4.184%, 5-Yr is up 5.7bps at 3.872%, 10-Yr is up 6bps at 3.988%, and 30-Yr is up 3.8bps at 4.484%.
  • Italian BTP spread up 0.3bps at 132.2bps / Portuguese PGB spread down 0.7bps at 66.6bps
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