EGBs-GILTS CASH CLOSE: Re-Escalation Drives Yields Lower

European FI rallied strongly Thursday as apparent Ukraine-Russia re-escalation dominated headlines and benefited safe haven assets.

• Bund and Gilt yield drops accelerated in the afternoon after Russia expelled a US diplomat and Pres Biden warned of an imminent Russian invasion of Ukraine.
• Curves bull steepened as near-term central bank hikes were priced out.
• ECB's Lane said in a wide-ranging MNI Webcast that the recent upward shift in inflation expectations will not make a major difference to monetary policy.
• Periphery EGBs managed to keep pace; 10Y BTP spreads fell as much as 5bp.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 6.5bps at -0.429%, 5-Yr is down 6.1bps at -0.019%, 10-Yr is down 4.7bps at 0.229%, and 30-Yr is down 3.3bps at 0.502%.
• UK: The 2-Yr yield is down 7.7bps at 1.33%, 5-Yr is down 6.8bps at 1.35%, 10-Yr is down 6.5bps at 1.459%, and 30-Yr is down 4.7bps at 1.541%.
• Italian BTP spread down 3.4bps at 160bps / Spanish down 1.2bps at 98.4bps