BONDS: EGBs-GILTS CASH CLOSE: Gilts Strengthen, But Continue To Lag Peers

Gilts once again underperformed Bunds, within a broad curve flattening move across European FI Tuesday.

• Long-end Gilts continued their recovery following vocal support in Monday's session by government ministers for PM Starmer, thereby alleviating near-term fiscal concerns.
• Despite being apparently weighed down by heavy sovereign and corporate supply, Bunds continued to track global peers and outperformed Gilts.
• Indeed, EGBs and Gilts tracked a Treasury rally in afternoon trade, with US data including retail sales and labour costs coming in softer-than-expected.
• On the day, the German curve bull flattened, with the UK's twist flattening.
• Periphery/semi-core EGB spreads were little changed.
• Wednesday's global focus will be the US employment report, though we also get the ECB's latest wage tracker and plenty of sovereign supply including a French syndication.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 0.9bps at 2.069%, 5-Yr is down 2.3bps at 2.383%, 10-Yr is down 3.2bps at 2.808%, and 30-Yr is down 3.7bps at 3.49%.
• UK: The 2-Yr yield is up 1.7bps at 3.643%, 5-Yr is down 0.6bps at 3.894%, 10-Yr is down 2.1bps at 4.506%, and 30-Yr is down 2.1bps at 5.325%.
• Italian BTP spread down 0.6bps at 60.5bps / French OAT down 0.8bps at 59.8bps