European core instruments closed stronger Wednesday, as Eurozone inflation showed mixed progress towards the ECB's 2% target.

• Both headline and core Eurozone flash HICP came in 0.1pp below the expectations coming into this month's round. While it was in line with tracking estimates (including MNI's) based on earlier national level prints, it helped maintain a generally positive tone in the morning session.
• That said, there were some lingering concerns about still-stubborn services inflation - MNI's review of the data is here.
• Ex-Europe factors led price movements for the rest of the day, including solid US ADP payrolls data and a pickup in oil prices. Softer-than-expected US ISM services data saw core FI bounce sharply, and while the initial move quickly faded, it helped Bund and Gilt yields edge lower into the close.
• Overnight, ECB's Holzmann noted that a June cut was possible "if the data allows it", while an April cut was unsurprisingly ruled out.
• The German curve twist flattened, with the UK's bull steepening. BTPs underperformed again.
• Thursday's calendar is quieter, with final services PMIs and the accounts of the ECB's March meeting.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 1.4bps at 2.853%, 5-Yr is down 0.2bps at 2.38%, 10-Yr is down 0.5bps at 2.395%, and 30-Yr is down 0.9bps at 2.571%.
• UK: The 2-Yr yield is down 2.8bps at 4.212%, 5-Yr is down 3.2bps at 3.906%, 10-Yr is down 2.9bps at 4.056%, and 30-Yr is down 1.6bps at 4.56%.
• Italian BTP spread up 1.9bps at 145.9bps / Spanish bond spread down 0.1bps at 86.1bps