Becoming desensitized to European inflation surprises

Relative to recent sessions, the European morning session has been rather subdued. The highlight came at 10:00GMT / 5:00ET when Eurozone and Italian HICP were released. Eurozone HICP surprised 7 tenths to the upside (core 4 tenths), although this was compared to a stale consensus that had updated after the Spanish, German or French surprises recently. Italian HICP came in 13 tenths above consensus expectations with the national NIC inflation seeing the biggest annual rise since April 1996.

• The Euribor strip saw little reaction and is largely unch on the day while Bunds saw a kneejerk fall of about 20 ticks that was almost instantly retraced.
• Looking ahead we have ADP employment this afternoon but markets are already looking ahead to tomorrow's ECB and BOE meetings.
• TY1 futures are up 0-3+ today at 127-31+ with 10y UST yields down -0.4bp at 1.785% and 2y yields up 0.7bp at 1.173%.
• Bund futures are up 0.10 today at 168.86 with 10y Bund yields down -0.9bp at 0.025% and Schatz yields down -0.1bp at -0.481%.
• Gilt futures are up 0.16 today at 122.10 with 10y yields down -1.0bp at 1.288% and 2y yields down -0.2bp at 1.052%.