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EGBs-GILTS CASH CLOSE: Weakness Resumes Post-UK Jobs, Pre-US CPI


Core European curves bear flattened Tuesday, with Gilts underperforming Bunds following May's UK labour market data.

  • The UK jobs report was initially interpreted as mixed, with Gilts initially weakening on higher-than-expected wage numbers, then reversing higher on the higher unemployment rate signalling labour market slack.
  • By session's end though Gilts had weakened with BoE hike pricing firming, as analysts focused on potential for further 50bp hikes on the robust wage data.
  • Movements in Bunds followed suit, with global core FI weakening in the latter half of the session amid anticipation over Wednesday's US CPI print.
  • BTPs underperformed on the periphery, with 10Y spreads to Germany closing at the widest level in over a month. GGBs steadied out after weakening sharply Monday on the announcement of the 15Y syndication held today.
  • Wednesday has a busy docket with the release of the BoE's financial stability report and Spanish final CPI in the morning, with the main focus being US CPI in the afternoon.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

  • Germany: The 2-Yr yield is up 2.7bps at 3.316%, 5-Yr is up 1.2bps at 2.769%, 10-Yr is up 0.9bps at 2.649%, and 30-Yr is up 1.4bps at 2.66%.
  • UK: The 2-Yr yield is up 5.6bps at 5.426%, 5-Yr is up 4.2bps at 4.886%, 10-Yr is up 2.3bps at 4.663%, and 30-Yr is up 2bps at 4.697%.
  • Italian BTP spread up 2.3bps at 176.9bps / Spanish up 1.2bps at 106.7bps

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