EGBs-GILTS CASH CLOSE: Repeating Afternoon Rally

In a near re-running of Tuesday's price action, core European FI weakened for most of the session Wednesday before rallying in the afternoon on weaker-than-expected US macro data.

• The flash August estimates of German state inflation was marginally higher than expected, with a North Rhine Westphalia upside surprise sinking Bund futures at 0630UK, and Gilts joined in the selloff on the open.
• After Spanish data was largely in line, Bunds and Gilts began rallying midday, and soared after more soft US data readings including a downward revision to Q2 GDP and below-expected private payrolls figures.
• The German curve finished mixed, with 10Y underperforming; the UK saw twist steepening with the short-end/belly outperforming. Yields finished off the lows but as noted, also well off session highs.
• Periphery EGB spreads widened modestly, having come off of the session's tightest levels into the close.
• Thursday's European calendar brings Dutch and French inflation data early, with Italian and Euro area figures later in the day; we also get the German unemployment report, the accounts of the ECB's July meeting, and appearances by BoE's Pill, and ECB's Schnabel and Guindos.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 3bps at 3.073%, 5-Yr is up 3.2bps at 2.573%, 10-Yr is up 3.5bps at 2.545%, and 30-Yr is up 2.5bps at 2.649%.
• UK: The 2-Yr yield is down 0.8bps at 5.238%, 5-Yr is down 2.1bps at 4.737%, 10-Yr is unchanged at 4.422%, and 30-Yr is up 1.7bps at 4.656%.
• Italian BTP spread up 0.7bps at 164.8bps / Spanish up 0.1bps at 101.6bps