BONDS: EGBs-GILTS CASH CLOSE: UK Short End Outperforms Amid Broader Softness

EGB yields rose modestly Thursday, with short-end Gilts outperforming across the space.

• Global core FI was soft in European morning trade, amid French OAT supply and higher energy prices.
• Later, US developments were constructive: weaker US continuing jobless claims data helped EGB futures away from session lows, while a late dip in oil (US Pres Trump called on OPEC to lower prices) saw a renewed bid toward the bond cash close (which ultimately faded).
• The UK curve twist steepned, with notable outperformance at the short end as Chancellor Reeves announced some relaxation to proposed non-dom tax regime changes, while the German curve lightly bear steepened.
• Periphery spreads widened early and failed to regain lost ground by the close, despite steady tightening throughout the session as equities rallied. BTPs underperformed.
• Confidence readings were roughly in line (France business/manufacturing, Eurozone consumer confidence -14.2 vs -14.1 expected), with UK GfK due after the cash close.
• Flash January PMIs are Friday's scheduled highlight, with ECB's Lagarde appearing at Davos. 

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.9bps at 2.245%, 5-Yr is up 1.5bps at 2.35%, 10-Yr is up 2bps at 2.55%, and 30-Yr is up 2.4bps at 2.778%.
• UK: The 2-Yr yield is down 2.9bps at 4.325%, 5-Yr is down 1.5bps at 4.336%, 10-Yr is up 0.3bps at 4.636%, and 30-Yr is up 1.1bps at 5.193%.
• Italian BTP spread up 2.6bps at 109.7bps / Greek up 2.2bps at 87.7bps