BONDS: EGBs-GILTS CASH CLOSE: Gilts Underperform Again Post-UK CPI

Gilt underperformance vs Bunds extended for a second day Wednesday.

• UK CPI data was firmer than expected, particularly services inflation, even when adjusting for Easter effects.
• This drove a sell-off in Gilts which lasted throughout the morning, exacerbated by continued weakness in Treasuries.
• Though UK yields closed off the highs, they (10Y) reached the highest levels since early April.
• While Bunds weakened in sympathy with Gilts, the 10Y UK/Germany spread closed close above 210bp for the first time in a month.
• Periphery / semi-core EGBs traded mixed, with Greece a notable outperformer.
• At an MNI event this morning, ECB's Kazaks said that "If the current baseline holds, we will soon reach the terminal rate".
• Thursday's data highlight is May flash PMIs, while we also get multiple speakers including BOE's Breeden, Pill, and Dhingra, and ECB's Nagel, Holzmann and Guindos (and the accounts of the April ECB meeting).

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 2.9bps at 1.871%, 5-Yr is up 4.2bps at 2.193%, 10-Yr is up 4bps at 2.646%, and 30-Yr is up 4.8bps at 3.136%.
• UK: The 2-Yr yield is up 4bps at 4.083%, 5-Yr is up 4.5bps at 4.241%, 10-Yr is up 5.4bps at 4.757%, and 30-Yr is up 6bps at 5.518%.
• Italian BTP spread unchanged at 99.6bps /Greek down 1.8bps at 74bps