EGBs-GILTS CASH CLOSE: Soft Inflation Data Sees Bunds Outperform

Bunds handily outperformed Gilts Monday as softer-than-expected German and Spanish inflation data cemented the likelihood that the ECB is done hiking.

• The German short-end/belly outperformed 10s as state-level data and then the national print confirmed a slowdown in both headline and core pressures, while Spanish HICP was also below expectations.
• MNI's Nowcast for Tuesday's Eurozone HICP figure points to a sub 3% Y/Y reading.
• Periphery spreads fell as ECB cut pricing mounted (over 80bp in reductions priced in 2024, vs under 60bp a couple of weeks ago) on the back of the soft inflation data, with BTPs outperforming.
• EGB gains faded however. A Nikkei sources story pointing to the Bank of Japan potentially adjusting its yield curve control regime in a hawkish direction at its meeting overnight tonight saw global bonds pull back in European afternoon trade.
• Gilts traded relatively soft ahead of Thursday's BOE decision.
• Attention overnight will be on the BOJ decision, followed by French / Italian / Eurozone inflation data Tuesday morning.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 2.4bps at 3.013%, 5-Yr is down 1.5bps at 2.668%, 10-Yr is down 1bps at 2.822%, and 30-Yr is down 2bps at 3.104%.
• UK: The 2-Yr yield is up 0.6bps at 4.783%, 5-Yr is up 3.1bps at 4.506%, 10-Yr is up 1.7bps at 4.561%, and 30-Yr is up 0.6bps at 5.031%.
• Italian BTP spread down 5.6bps at 191.6bps / Spanish down 2.3bps at 107.2bps