Retrace UK CPI Inspired Weakness

Core/semi-core EGBs have retraced this morning’s UK inflation-inspired weakness to tilt slightly higher today.

• UK March inflation was higher-than-expected across headline, core and services categories.
• The Eurozone final March inflation print confirmed flash estimates (headline 2.4% Y/Y, core 2.9% Y/Y) and was not a market mover.
• The release indicated that services’ percentage point contribution to the 2.4% Y/Y annual rate increased relative to February. We will add more on the underlying details of the report in due course.
• Bunds are +8 ticks at 131.29, sitting comfortably within well-defined technical levels.
• The German and French cash curves have twist flattened, with the short-end underperforming.
• 10-year periphery spreads to Bunds are generally tighter except for Greece. The BTP/Bund spread is currently 2.3bps tighter at 143.6bps but remains above Monday’s narrowest levels.
• ECB-speak headlines the remainder of today’s calendar, with ECB’s Lagarde, Schnabel, Cipollone and de Cos all scheduled to speak.