US: Frontline Senate Democrats Outperforming Biden's Approval Rating

Wednesday afternoon saw a partial reversal of most of the previous 24 hours' post-US CPI moves, with the UK curve bull steepening and Germany's bull flattening.

• Bund and Gilt yields were higher by midday, but faded amid apparent profit-taking/position squaring (2Y Schatz / UK had risen 16bp / 19bp from pre-US CPI), while equities gave up their nascent bounce.
• UK short-end outperformed, on both a broad relief retracement for core FI, and below-expected UK inflation.
• BoE hike pricing was little changed on the session, with the ECB terminal rate 1-2bp higher.
• Re-widening of asset swap spreads vs EGBs continued to be a theme as collateral shortages continued to be assessed following the ECB's decision on deposit remuneration last week (a theme touched on by Chief Econ Lane today).
• Periphery spreads were a little wider, though still well off the week's highs.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany:

• Germany: The 2-Yr yield is up 3.4bps at 1.428%, 5-Yr is up 0.2bps at 1.581%, 10-Yr is down 1.4bps at 1.716%, and 30-Yr is down 4.6bps at 1.752%.
• UK: The 2-Yr yield is down 7.8bps at 3.091%, 5-Yr is down 2.6bps at 3.072%, 10-Yr is down 3.9bps at 3.132%, and 30-Yr is down 6bps at 3.43%.
• Italian BTP spread up 1.7bps at 228.4bps / Greek up 1.6bps at 253.2bps