EGB/GILT

European govies started the session on a strong footing with core markets giving up a lot of the early gains while the periphery has remained bid.

• Gilts had a strong start, but quickly sold off with cash bonds trading below yesterday's close. Cash yields are 1-2bp higher on the day with the curve trading close to flat overall.
• It is a similar story for bunds which now trade close to unch on the day. Last yields: 2-year -0.7125%, 5-year -0.7056%, 10-year -0.498%, 30-year -0.046%.
• BTPs have remained bid with yields down 3-4bp and hitting the lows of the day.
• Yesterday's tech-driven sell off in US stocks spilled over to Asian markets but lost traction in the Europe session with UK/Eurozone stocks inching higher.
• Supply this morning came from Germany (Bunds, E3.391bn) and Portugal (OTs, EUR1.21bn).
• The focus shifts to the ECB meeting tomorrow. No material change in monetary policy is expected, but the press conference will be watched closely for President Lagarde's response to the recent strength of the euro, the return of HICP to deflation territory and the Fed's adoption of an average inflation target. MNI has published its ECB Preview online and by email.