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EGBs-GILTS CASH CLOSE: Short-End Shockwaves From Across The Atlantic

BONDS

The German and UK curves twist flattened Wednesday as global bond markets assessed the latest shock upside surprise to US inflation data.

  • Stronger-than-expected UK GDP set an initial bearish tone. And with traders eyeing a 100bp hike at the July Fed meeting post-CPI, and Bank of Canada delivering a surprise 100bp increase, BoE and ECB end-2022 rate hike pricing were boosted by 10-15bps.
  • UK short-end/belly yields were flat but faded mid-session rises; in Germany Schatz underperformed with yields rising through the session, punctuated by US CPI. 30Y yields fell on both curves.
  • Periphery spreads widened a little on the day. Thursday sees a no-confidence vote in Italy; MNI reports that there is a strong possibility the Draghi government will fall.

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

  • Germany: The 2-Yr yield is up 10.3bps at 0.458%, 5-Yr is up 6.3bps at 0.836%, 10-Yr is up 1.3bps at 1.145%, and 30-Yr is down 2.6bps at 1.38%.
  • UK: The 2-Yr yield is up 0.6bps at 1.798%, 5-Yr is down 0.1bps at 1.755%, 10-Yr is down 1.5bps at 2.06%, and 30-Yr is down 4.8bps at 2.522%.
  • Italian BTP spread up 1.9bps at 200.1bps / Spanish up 1.3bps at 110.8bps
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