EGBs-GILTS CASH CLOSE: UK Yields Test Month's Highs Post-CPI

Gilts sold off sharply Wednesday, as both core EGB and UK curves steepened.

• A variety of factors weighed on global core FI, with geopolitics at the fore once again in European afternoon trade with news that Israel would allow humanitarian aid to move from Egypt to Gaza.
• The Gilt selloff came despite a relatively muted immediate reaction to the September UK inflation data which was not seen as significantly altering the BoE outlook (readings were slightly above consensus, but headline and services CPI were below the BoE's August forecasts - see our review here).
• Only later in the session did UK rates really begin to weaken, with 5Y Gilts ultimately underperforming on the day.
• Periphery EGB spreads widened amid a weak session for equities. Spread widening was led by Italy, with an exchange auction potentially also weighing.
• Supply remains a theme Thursday, with Spanish and French bond auctions. The data docket is comparatively light, with French confidence indicators the highlight; we also hear from ECB's Visco and Valimaki.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 4.9bps at 3.199%, 5-Yr is up 2.8bps at 2.841%, 10-Yr is up 4.2bps at 2.924%, and 30-Yr is up 4.5bps at 3.097%.
• UK: The 2-Yr yield is up 12.3bps at 5.007%, 5-Yr is up 15.1bps at 4.7%, 10-Yr is up 14.5bps at 4.657%, and 30-Yr is up 10.3bps at 5.039%.
• Italian BTP spread up 5.1bps at 205.8bps / Greek up 2.4bps at 150bps