BONDS: EGBS-GILTS CASH CLOSE: Soft UK CPI Provides The Latest Boost To Gilts

Gilts easily outperformed peers Wednesday.

• The UK September CPI report came in softer than expectations, triggering a sizeable bull steepening of the Gilt curve as a further 25bp BoE cut by year-end became priced as more likely than not (closing at about 70% priced vs closer to 40% at Tuesday's close).
• The inflation data built upon other recent dovish developments in the UK including on the labor market data and public sector finance fronts.
• In contrast, EGBs gained slightly but were relatively stable following the UK CPI release.
• For the day, the German curve bear steepened slightly, with the UK's closing bull steeper.
• Periphery/semi-core EGB spreads tightened modestly.
• The highlight for the remainder of the week remains Friday's flash October PMIs, with US CPI that day also in focus.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 0.1bps at 1.909%, 5-Yr is up 0.5bps at 2.16%, 10-Yr is up 1.1bps at 2.563%, and 30-Yr is up 1.9bps at 3.147%.
• UK: The 2-Yr yield is down 9.1bps at 3.767%, 5-Yr is down 7.2bps at 3.872%, 10-Yr is down 6.1bps at 4.417%, and 30-Yr is down 4.5bps at 5.221%.
• Italian BTP spread down 0.7bps at 78.5bps / French OAT down 0.3bps at 78.9bps