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Gilts Outperforming Ahead Of A Busy US Data Session

BONDS
Gilts are outperforming German and US counterparts in early Wednesday trade.
  • UK yields reversed most of Tuesday's rise on a slowdown in core UK CPI data out this morning, which was driven by a slowdown in service inflation.
  • This lessened conviction in a 25bp March BoE hike (92% priced vs 100% yest) and pulled down terminal rate pricing by around 15bp.
  • The short-end / belly-led UK bull steepening underpinned strength in Bunds and to a lesser extent, Treasuries.
  • A busy US data session ahead: though of lesser importance than yesterday's CPI reading, Feb Empire Manufacturing and Jan Retail Sales are the next key data points, followed by Industrial Production and the NAHB housing index.
  • ECB's Lagarde speaks at 0900ET/1400GMT.
  • In supply, in the US we get $15B 20Y Bond auction, with a German auction up shortly and ongoing Slovak and Belgian syndications today.

Latest levels:

  • Mar 10-Yr US Tsy futures (TY) up 7/32 at 112-17.5 (L: 112-10.5 / H: 112-18)
  • Mar Bund futures (RX) up 35 ticks at 135.56 (L: 135.15 / H: 135.6)
  • Mar Gilt futures (G) up 97 ticks at 103.87 (L: 103.3 / H: 103.92)
  • Italy / German 10-Yr spread 0.5bps wider at 179.1bps

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