EGBs-GILTS CASH CLOSE: UK Underperforms Amid Broader Flattening Move

Longer-duration instruments outperformed in Europe Thursday as part of a global flattening move, with periphery EGB spreads tightening.

• The UK short-end and belly weakened after an uncovered BoE APF sales operation. BoE Treasury committee testimony didn't really move rate expectations.
• The German curve bull flattened. The data highlight was German inflation which was on the soft side of consensus but consistent with an upward 0.2pp revision to Eurozone inflation in the final Jan reading.
• BTPs outperformed despite little change in implied ECB hike pricing, reflecting a broader risk-on move (Eurostoxx futures hit the highest levels since January 2022).
• Appearances by the ECB's de Cos and de Guindos come after the cash close; attention early Friday is on UK GDP.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 2.5bps at 2.692%, 5-Yr is down 3.8bps at 2.33%, 10-Yr is down 6bps at 2.303%, and 30-Yr is down 6.2bps at 2.272%.
• UK: The 2-Yr yield is up 3.2bps at 3.5%, 5-Yr is up 3bps at 3.215%, 10-Yr is down 2.2bps at 3.291%, and 30-Yr is down 3.3bps at 3.736%.
• Italian BTP spread down 5.1bps at 181.6bps / Spanish down 0.8bps at 93.3bps