EGBs-GILTS CASH CLOSE: Weaker After Intraday Reversal

A volatile week closed with a characteristically volatile session, with early gains fully reversed across EGBs and Gilts, and bear steepening across the space.

• Once again, US data and UK politics were the driver. Gilts rallied in the morning as news filtered in that Chancellor Kwarteng would be replaced and a fiscal "U-Turn" announced.
• But yields reversed higher in the afternoon in a combination of "buy the rumour, sell the fact" and profit-taking, with robust US retail sales and surprisingly high UMichigan inflation expectations adding fuel to the fire.
• Though short-end yields remained relatively anchored (next BoE pricing remained around 100bp), long-end Gilts underperformed, with 30Y yields jumping 60bp off the lows.
• Bunds outperformed Gilts easily, while BTP spreads widened sharply in the afternoon after the US data.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany:

• Germany: The 2-Yr yield is up 3.5bps at 1.956%, 5-Yr is up 3.3bps at 2.114%, 10-Yr is up 5.9bps at 2.346%, and 30-Yr is up 9.8bps at 2.399%.
• UK: The 2-Yr yield is up 11.6bps at 3.916%, 5-Yr is up 7.4bps at 4.318%, 10-Yr is up 13.7bps at 4.335%, and 30-Yr is up 23.4bps at 4.784%.
• Italian BTP spread up 5.1bps at 244.4bps / Spanish up 1.2bps at 117.1bps