EGBs-GILTS CASH CLOSE: UK Short End Underperforms Pre-CPI

Weakness at the UK short end was the standout move in Tuesday's trade, with flattening seen across European curves.

• The 2Y UK segment underperformed, with an 8.8bp rise in implied BoE terminal Bank Rate pricing driving the move.
• The 4.86% rate implied for October is the highest since Mar 9, spurred by strong UK wage growth data Tue morning, and ahead of Wednesday's key CPI reading.
• The short end was the weak link on the German curve as well, though it easily outperformed its UK counterpart (ECB terminal pricing rose by just 3bp, with comments by Chief Econ Lane affirming that there would be a hike of at least some magnitude in May).
• Periphery spreads tightened slightly, though came off session lows in in the afternoon as equities came off their highs.
• Apart from UK CPI Wednesday, we get final Eurozone CPI and multiple ECB (Lane, Knot, de Cos, Schnabel) speakers, with BoE's Mann also appearing.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 2.7bps at 2.906%, 5-Yr is up 2.5bps at 2.52%, 10-Yr is up 0.4bps at 2.477%, and 30-Yr is down 1.8bps at 2.533%.
• UK: The 2-Yr yield is up 7.8bps at 3.691%, 5-Yr is up 7.7bps at 3.588%, 10-Yr is up 5.6bps at 3.747%, and 30-Yr is up 5.2bps at 4.098%.
• Italian BTP spread down 0.7bps at 182.4bps / Spanish down 0.8bps at 101.7bps