EGBs-GILTS CASH CLOSE: Supply Continues To Weigh Ahead Of Event Risk

Gilts underperformed Bunds Tuesday, in a weak session for global government bonds.

• There were few evident drivers in the session - most attention is on upcoming event risk, including Thursday's ECB decision (our preview is here), and next week's Federal Reserve/BoE meetings.
• However, continued heavy supply continued to weigh, today's examples being EU dual-tranche tap syndication and long end Gilt syndication.
• BoJ post-meeting press conference that was seen as less dovish than hoped weighed early, while an uptick in oil prices had a negative impact.in afternoon European trade.
• In contrast, data was largely shrugged off, including soft Eurozone consumer confidence data, and the ECB's bank lending survey showing continued tightening conditions amid weaker demand.
  
• The German curve bear steepened, with weakness in the UK concentrated in the belly of the curve as rate cut expectations were pared.
• Periphery spreads finished a little wider, mirroring a pullback in equities.
• Wednesday's calendar highlight is the release of January flash PMIs.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 2.5bps at 2.714%, 5-Yr is up 4.2bps at 2.267%, 10-Yr is up 6.2bps at 2.352%, and 30-Yr is up 8bps at 2.538%.
• UK: The 2-Yr yield is up 6.8bps at 4.375%, 5-Yr is up 8.5bps at 3.93%, 10-Yr is up 8.2bps at 3.986%, and 30-Yr is up 5.3bps at 4.583%.
• Italian BTP spread up 1.7bps at 156.6bps / Spanish up 0.4bps at 91.8bps