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EGBs-GILTS CASH CLOSE: Strong Rally On US Inflation Relief

BONDS

EGBs and Gilts rallied strongly Thursday in response to a softer-than-expected US CPI reading for October.

  • Terminal rate pricing for both the ECB and BoE fell sharply in the aftermath of the inflation data, and closed with about 12bp in hikes removed from each rate path to mid-2022.
  • The German and UK curves bull steepened on the day, with the belly outperforming on the German curve, and 10Y on the UK.
  • Periphery bonds rallied, with 10Y BTP yields falling nearly 30bp. BTP spreads to Bunds closed below 200bp for the first time since mid-July.
  • Attention swiftly turns to UK GDP and final German CPI first thing Friday.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

  • Germany: The 2-Yr yield is down 13.1bps at 2.08%, 5-Yr is down 16.6bps at 1.927%, 10-Yr is down 16.3bps at 2.009%, and 30-Yr is down 9.2bps at 1.998%.
  • UK: The 2-Yr yield is down 12.7bps at 3.103%, 5-Yr is down 14.3bps at 3.309%, 10-Yr is down 16.5bps at 3.292%, and 30-Yr is down 16bps at 3.406%.
  • Italian BTP spread down 12.3bps at 199.2bps / Spanish down 3.3bps at 101.1bps

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