EGBs-GILTS CASH CLOSE: Shrugging Off Sticky Eurozone Core Inflation

The German curve twist steepened while the UK's twist flattened Monday.

• Eurozone flash July inflation reading was the highlight of the European schedule, and showed a slight upside surprise on core vs survey - but were largely in-line based on national-level prints and had little lasting impact.
• Afternoon trade proved slightly more constructive, as US Treasuries gained (in part after softer-than-expected MNI Chicago PMI data).
• Schatz yields closed slightly lower, in contrast to UK 2Y yields ticking higher (note that ECB terminal hike expectations rose 1bp on the day, but BoE was up 6bp ahead of Thursday's MPC decision).
• Further down the curve, 10Y Bund yields closed unchanged, with its UK counterpart seeing a 2bp dip in yields.
• Greece outperformed on the periphery, potentially on the prospective achievement of investment grade status with Scope Ratings on Friday following Japan's R&I move today (although neither impacts ECB purchase/bond index inclusion).
• Tuesday morning brings final manufacturing PMIs and German labour market data.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 1.3bps at 3.038%, 5-Yr is down 0.9bps at 2.536%, 10-Yr is unchanged at 2.492%, and 30-Yr is up 0.1bps at 2.57%.
• UK: The 2-Yr yield is up 1.2bps at 5%, 5-Yr is down 1.8bps at 4.394%, 10-Yr is down 1.7bps at 4.309%, and 30-Yr is down 1.9bps at 4.462%.
• Italian BTP spread down 1.2bps at 161bps / Greek down 6.6bps at 126.9bps