EGB/Gilt: ECB Still Sticking With 'Temporary' Inflation Narrative

European sovereign bonds have continued to post gains alongside a broad recovery in equities.

• Gilt yields are 2-4bp lower on the day with the short-end outperforming and the curve bull steepening.
• The bund curve has bull flattened with the 2s30s spread 3bp narrower.
• BTPs have firmed with cash yields broadly 1-2bp lower across the curve.
• An IMFC statement by ECB President Christine Lagarde, published on the ECB's website, argued that the inflation surge is being driven by temporary factors and that it was crucial not to withdraw policy support prematurely.
• The ECB's Francois Villeroy de Galhau has suggested that while PEPP is likely to end in March, the ECB should keep some of the PEPP's flexibility in the toolbox.
• It is another busy day for central bank speakers with the ECB's Knot and the BoE's Tenreyro, Mann, and Cunliffe due up.
• Supply this morning came from Ireland (IGBs, EUR1.5bn).