EGBs-GILTS CASH CLOSE: Reflation Narrative Maintains Steepening Pressure

The UK and German curves bear steepened yet again Tuesday as the reflation narrative has driven global core FI yields higher this week. Periphery spreads were little changed.

• EGBs mainly took their cue from US Treasuries, with 10-Yr yields hitting 14-month highs on expectations of strong US economic activity and further fiscal stimulus.
• Germany and Spain posted above-expected CPI prints in the morning. Upside surprises in French and Eurozone sentiment indicators added a bit of reflationary sentiment.
• That said, Bund and Gilt yields ended the session off the highs, with some citing month-end extension dynamics as a possible support.
• Wed sees EZ/French/Italian CPI and revised Q4 UK GDP in data, as well as German 15-Yr supply. A few speakers as well with ECB's Lagarde, Rehn, Visco and Villeroy appearing.

Closing yields/10-Yr Spreads to Bunds:

• Germany: The 2-Yr yield is up 1.7bps at -0.692%, 5-Yr is up 3.2bps at -0.625%, 10-Yr is up 3.2bps at -0.286%, and 30-Yr is up 2bps at 0.268%.
• UK: The 2-Yr yield is up 0.7bps at 0.074%, 5-Yr is up 2.3bps at 0.364%, 10-Yr is up 3.6bps at 0.824%, and 30-Yr is up 4.1bps at 1.36%.
• Italian BTP spread up 0.9bps at 96.6bps / Spanish down 0.2bps at 62.9bps