EGBs-GILTS CASH CLOSE: UK Underperformance Continues

A weak set of U.S. data dragged German yields back down Tuesday afternoon, but UK yields kept marching higher - with 10Y vs Bund spreads reaching their widest since March.

• A weak French flash PMI initially set a dovish tone for the day, pushing core yields to session lows, though a more encouraging German reading more than reversed the drop. UK services PMI held up well, though manufacturing disappointed.
• While the German curve twist steepened, Gilts bear flattened once again: 2Y yields set their 5th consecutive new post-2008 high close, off 4bp from session highs. UK 5Y underperformed on the curve, piercing the 2.50% mark for the first time since 2011.
• Greece notably underperformed its periphery peers with a double-digit spread widening.

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

• Germany: The 2-Yr yield is down 4.1bps at 0.854%, 5-Yr is down 1.7bps at 1.104%, 10-Yr is up 1.3bps at 1.319%, and 30-Yr is up 3.6bps at 1.487%.
• UK: The 2-Yr yield is up 8.9bps at 2.719%, 5-Yr is up 11.9bps at 2.5%, 10-Yr is up 6.2bps at 2.576%, and 30-Yr is up 4.4bps at 2.883%.
• Italian BTP spread up 0.6bps at 233.3bps / Greek up 11.6bps at 261.9bps