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EGBs-GILTS CASH CLOSE: Supply Weighs

BONDS

European core FI weakened Tuesday as extremely heavy corporate and sovereign supply weighed.

  • Bunds sold off steadily throughout the session and underperformed Gilts. The German curve bear steepened, with the UK's mixed.
  • With Bunds selling off, periphery EGB spreads compressed, with 10Y BTP/Bund dipping below 190bp for the first time since Dec 13.
  • Central bank speakers at a Riksbank symposium delivering little impactful communication (Fed Chair Powell's absence of pushback against the recent easing of financial conditions sparked a brief modest rally)
  • Attention was on heavy supply, with E39bln of sales including corporates (2nd biggest volume day ever, per BBG).
  • Wednesday sees several ECB speakers including Holzmann, Villeroy, Rehn and de Cos; the week's major event remains US CPI Thursday.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany:

  • Germany: The 2-Yr yield is up 4.2bps at 2.654%, 5-Yr is up 7.8bps at 2.344%, 10-Yr is up 8bps at 2.308%, and 30-Yr is up 6.9bps at 2.249%.
  • UK: The 2-Yr yield is up 3.3bps at 3.478%, 5-Yr is up 1.9bps at 3.465%, 10-Yr is up 3.1bps at 3.557%, and 30-Yr is down 3.8bps at 3.907%.
  • Italian BTP spread down 4.4bps at 191.4bps / Spanish down 1.8bps at 102.7bps

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