EGBS-GILTS CASH CLOSE: Soft US Inflation Report Cements Rally

A weaker-than-expected US core inflation print Tuesday afternoon cemented a reversal lower in yields from multi-year highs.

• The downside surprise helped ECB and BOE hike pricing fade slightly, and this led the German and UK curves bull flatten.
• Earlier, yields had peaked in late morning (10Y Bunds and Gilts hitting 7-yr highs).
• Periphery spreads tightened, with Italy leading the way as the the CPI release forced reconsideration of central bank hawkishness ahead of Thursday's ECB decision.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 5.8bps at 0.075%, 5-Yr is down 5.3bps at 0.573%, 10-Yr is down 2.6bps at 0.79%, and 30-Yr is down 0.1bps at 0.927%.
• UK: The 2-Yr yield is down 5bps at 1.508%, 5-Yr is down 4.9bps at 1.564%, 10-Yr is down 4.4bps at 1.803%, and 30-Yr is down 3.4bps at 1.95%.
• Italian BTP spread down 3bps at 161.9bps / Spanish down 1.5bps at 92.2bps