EGBs-GILTS CASH CLOSE: UK Short-End Underperforms

Bunds pared early losses but Gilt yields diverged and continued rising into the cash close Tuesday for another session of underperformance.

• Better-than-expected UK jobs data added to the BoE hiking narrative and the short-end sold off; 2 year yields at the highest since October 2018. 10Y yields hit the highest since May 2019.
• Attention turns squarely to UK CPI data Wednesday.
• The German short end easily outperformed, in tandem with a EUR fall.
• Periphery EGB yields all widened, partly on waning risk appetite (equities lower), partly on supply: Italy conducted a specialist tap operation, while Greece announced a mandate for a new 10Y bond. The UK, Germany, and Belgium (syndication) also issued.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 0.9bps at -0.57%, 5-Yr is down 0.3bps at -0.344%, 10-Yr is up 0.7bps at -0.018%, and 30-Yr is up 1.4bps at 0.279%.
• UK: The 2-Yr yield is up 3.2bps at 0.867%, 5-Yr is up 2.9bps at 1.024%, 10-Yr is up 3.1bps at 1.217%, and 30-Yr is up 3.2bps at 1.329%.
• Italian BTP spread up 1.7bps at 133.5bps / Greek up 2bps at 164.7bps