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EGBs-GILTS CASH CLOSE: Yields Continue To Claw Back UK CPI Drop


European yields continued to rebound from Wednesday morning's UK CPI-inspired drop, with curve short-end/bellies underperforming Thursday.

  • While there were no obvious catalysts to the selloff, a combination of solid Australian and US labour market data rekindled a hawkish central bank narrative, and UK and Bund yields were dragged higher through to the cash close.
  • Gilts underperformed, with the UK curve bear flattening as BoE hike expectations bounced (terminal pricing +7bp), tipping 2Y yields just shy of the 5% handle. MNI's review of Wednesday's UK CPI data is here.
  • German yields rose 5-6bp across the curve, with 10Y yields ending higher than Monday's close.
  • All in all, German 10Y yields are 17bp up from Wednesday's low, UK just 13bp.
  • Periphery spreads tightened, led by Italy - 10Y BTP again tested the 160bp mark to Bunds.
  • Attention first thing Friday morning will be on UK retail sales data.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

  • Germany: The 2-Yr yield is up 4.9bps at 3.123%, 5-Yr is up 5.6bps at 2.571%, 10-Yr is up 5.2bps at 2.49%, and 30-Yr is up 3.5bps at 2.504%.
  • UK: The 2-Yr yield is up 8.4bps at 4.994%, 5-Yr is up 7.5bps at 4.385%, 10-Yr is up 6.2bps at 4.277%, and 30-Yr is up 3.5bps at 4.412%.
  • Italian BTP spread down 2.4bps at 161.8bps / Spanish down 1.1bps at 99.7bps

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