EGBs-GILTS CASH CLOSE: Solid Rebound

Gilts and Bunds bounced Tuesday after two consecutive down days.

• The negative tone of the previous sessions carried over in morning trade, exacerbated by a heavy data slate (including 30Y Spain syndication).
• A big upside surprise in German factory orders initially weighed on Bunds, though MNI notes it was largely due to one-off factors (ie aircraft orders) with core orders contracting further. Downward inflation expectations evident in the ECB's monthly consumer survey didn't have much impact.
• Bund and Gilt futures hit fresh lows in late morning but reversed higher in the afternoon.
• Multiple factors were at play, including the conclusion of the day's issuance which was well absorbed (large books for Spain, strong auction of 30Y Green Gilt), and renewed concern over US regional banks. All in all the rebound looked corrective.
• Both the German and UK curves bull flattened, with Gilts outperforming. Periphery EGB spreads ended mixed.
• German industrial production data features early Wednesday.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 1.8bps at 2.595%, 5-Yr is down 2.2bps at 2.215%, 10-Yr is down 2.4bps at 2.292%, and 30-Yr is down 1bps at 2.51%.
• UK: The 2-Yr yield is down 3.9bps at 4.47%, 5-Yr is down 4.5bps at 3.953%, 10-Yr is down 5.7bps at 3.95%, and 30-Yr is down 6.5bps at 4.552%.
• Italian BTP spread down 0.5bps at 156.3bps / Spanish bond spread up 0.6bps at 91.8bps