EGBs-GILTS CASH CLOSE: Yields Retrace Higher To Open The Year

European bonds weakened to start 2024, though yields finished off session highs.

• Some of the late 2023 bullishness in rates corrected at the open. As trading picked up following the holiday period, the weakness continued, spurred in part by a 3+% jump in oil prices.
• The oil rise completely reversed later in the session, helping yields retrace lower in the afternoon.
• Gilts underperformed Bunds on the day, with the UK curve bear steepening (+6 to 12bp) and Germany's fairly flat (+4 to 5bp).
• Periphery spreads were mostly tighter, with Italy outperforming and Portugal lagging.
• Manufacturing PMIs for December were final for the UK and Eurozone, with the readings for Italy beating and Spain missing - none moved the needle. Eurozone M3 / lending data was largely in line.
• Wednesday's slate is light, with Spanish and German labour market featuring. Germany sells Schatz, while syndication for a new 10Y EUR Slovenian benchmark looks likely to be conducted.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 4.8bps at 2.452%, 5-Yr is up 4.3bps at 1.991%, 10-Yr is up 4.1bps at 2.065%, and 30-Yr is up 4.7bps at 2.31%.
• UK: The 2-Yr yield is up 6.6bps at 4.05%, 5-Yr is up 7.6bps at 3.539%, 10-Yr is up 9.7bps at 3.634%, and 30-Yr is up 12.3bps at 4.265%.
• Italian BTP spread down 2.9bps at 164.7bps / Portuguese up 0.6bps at 63.8bps