EGBs-GILTS CASH CLOSE: Weak US Data And BoJ Decision Boost Long End

The UK and German curves twist flattened Wednesday after the Bank of Japan decision maintained downside pressure on long-end yields with their decision to maintain their 10Y JGB yield-capping regime.

• The short end of European curves weakened early as UK CPI came in above expectations, and ECB speakers Villeroy and Rehn pushed back against Tuesday's Bloomberg story that pointed to a downshift in rate hikes after Feb.
• But global yields headed lower in the European afternoon as a slew of weak US data spurred recession speculation and pushed Fed terminal rate pricing down.
• Periphery spreads tightened against this backdrop, with 10Y BTP/Bund spreads touching a fresh post-April 2022 low of 170bp.
• Attention turns to an appearance by ECB's Lagarde and the Norges Bank decision early Thursday.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.6bps at 2.463%, 5-Yr is down 4.7bps at 2.061%, 10-Yr is down 6.8bps at 2.023%, and 30-Yr is down 10.2bps at 1.989%.
• UK: The 2-Yr yield is up 3.3bps at 3.495%, 5-Yr is down 1.3bps at 3.263%, 10-Yr is down 1bps at 3.314%, and 30-Yr is up 0.6bps at 3.673%.
• Italian BTP spread down 6.3bps at 173.8bps / Spanish down 3.7bps at 94bps