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EGBs-GILTS CASH CLOSE: US CPI Sends Bund Ylds To 2-Yr Highs

BONDS

A very busy Wednesday for the European FI space: Bunds and Gilts initially traded firmer, but then the biggest upside surprise in US inflation data history hammered global core FI in the afternoon.

  • Curves bear steepened sharply, with Bund yields breaking the 2020 high of -0.1398% to levels not seen since 2019 (Gilts not far from the mid-March 2021 high just below 0.91%).
  • Risk appetite recovered from early lows, with equities bouncing strongly, and periphery EGB spreads flat on the session.
  • Earlier, UK GDP data surprised to the upside. Portugal sold E1.5bn of OTs.
  • Thursday sees a quiet data schedule (some final CPIs); but busy on issuance, with E9.25bln of BTPs on offer, as well as Ireland selling E1.0-1.5bn of IGB. BOE's Bailey and Cunliffe, and ECB's Centeno appear.

Closing yields/10-Yr Spreads to Bunds:

  • Germany: The 2-Yr yield is up 1.2bps at -0.656%, 5-Yr is up 3.1bps at -0.518%, 10-Yr is up 3.8bps at -0.123%, and 30-Yr is up 3.8bps at 0.446%.
  • UK: The 2-Yr yield is up 4.1bps at 0.105%, 5-Yr is up 4.7bps at 0.402%, 10-Yr is up 5.3bps at 0.886%, and 30-Yr is up 3.7bps at 1.425%.
  • Italian BTP spread unchanged at 114.7bps/ Spanish spread up 0.3bps at 68.5bps
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