Gilts Outperform As UK CPI Feedthrough Continues To Dominate

Gilts outperform core/semi-core EGBs this morning following the lower than expected UK CPI print. Gilt futures are +67 ticks at 97.68, while Bunds are +27 at 133.38.

• This morning's UK print is not as soft as it appeared at first glance, with services CPI only just below the BoE's Feb MPR forecasts and driven largely by a downside surprise in the volatile air fares component. Gilts have nonetheless held onto the majority of their initial gains.
• Eurozone preliminary Q4 '23 GDP was in line with the advance reading, while industrial production was stronger than expected (even when excluding Ireland, which contributed +1.4pp to the total 2.6% M/M figure).
• Today's supply slate features EGB issuance from Greece, Germany and Portugal, while the DMO will re-open the Jan-34 Gilt later this morning.
• Cash curves have bull steepened, with Gilt yields unsurprisingly seeing the largest moves lower. 10-year periphery spreads to Bunds are tighter as European equities recover from yesterday's lows. GGB spreads are the exception, trading flat on the day, likely a function of this morning's supply.
• The remainder of today's docket is dominated by central bank speak: BoE Governor Bailey testifies to the House of Lords Economic Affairs Committee today at 1500GMT. For the ECB, Executive Board member Cipollone speaks on the digital Euro at 1400GMT/1500CET. The Bundesbank's Nagel rounds off the day at 1700GMT/1800CET joining a panel discussion on "How will financing work in the future?".