EGBs-GILTS CASH CLOSE: UK Belly Outperforms Ahead Of BoE / ECB Decisions

Gilts rallied sharply Wednesday with the belly of the UK curve outperforming, with EGBs gaining in their wake.

• Weaker-than-expected UK economic activity/GDP data kicked off a strong session for Gilts, which gained for most of the session ahead of Thursday's BoE decision.
• BoE cut pricing ramped up: rates are expected to end 2024 101bp below current levels and 105bp below the February 2024 peak.
• Conversely, Bunds started the day on the back foot but regained ground on multiple factors, getting a tailwind from Gilt and Treasury gains, and softer-than-expected Eurozone industrial production data helping. While
• Bunds temporarily weakened on comments by German Chancellor Scholz that while a budget deal has been reached, the "debt brake" could be suspended again in 2024. However, Bunds ended on the session highs.
• Periphery EGBs traded mostly tighter to Bunds, with Greece the outlier, widening for a 2nd consecutive session.
• The Federal Reserve decision and communications take focus after the European close, with attention then swiftly turning to the ECB (MNI preview here) and BoE (MNI preview here) decisions on Thursday.

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

• Germany: The 2-Yr yield is down 4.2bps at 2.667%, 5-Yr is down 4.3bps at 2.167%, 10-Yr is down 5.3bps at 2.173%, and 30-Yr is down 5.5bps at 2.346%.
• UK: The 2-Yr yield is down 14.8bps at 4.381%, 5-Yr is down 15.4bps at 3.886%, 10-Yr is down 13.7bps at 3.83%, and 30-Yr is down 14.1bps at 4.333%.
• Italian BTP spread down 2.2bps at 175.6bps / Greek up 3.1bps at 125bps