Core EGBs outperformed Gilts Tuesday, with periphery/semi-core spreads widening.

• Gilts underperformed Bunds early in the session in a continuation of Monday's price action as next week's BoE decision remained in focus, with little impact on the day from speakers (ECB's de Guindos, Lane) or supply (Gilt linker, Schatz).
• Early in the afternoon session, OAT spreads widened sharply with no apparent headline trigger, with a broader flight-to-safety move seeing equities fall, Bunds strengthen and periphery EGB spreads also widen. Some desks pointed to much earlier headlines that leftists planned to take take measures to scrap French pension reforms.
• 10Y OAT/Bund widened almost 4bps on the day to close at 69.6bps, highest since early July.
• The German curve bull steepened, with UK yields down 3-4bp across the curve. Gilts' underperformance meant the 10Y spread to Bunds hit the widest levels since mid-June.
• Wednesday's main focus will be flash July PMI data.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 5-Yr yield is down 6.4bps at 2.397%, 10-Yr is down 5.6bps at 2.439%, and 30-Yr is down 4.5bps at 2.634%.
• UK: The 2-Yr yield is down 3.7bps at 4.025%, 5-Yr is down 4bps at 3.94%, 10-Yr is down 3.7bps at 4.124%, and 30-Yr is down 3.3bps at 4.636%.
• Italian BTP spread up 3bps at 130.8bps / Greek up 4.6bps at 99.9bps