EGB/GILT: ECB Reiterates 'Temporary' Nature of Inflation Spike

European government bonds have rallied this morning while equities are broadly close to flat on the day.

• Bunds have rallied and the curve has bull flattened with the 2s30s spread narrowing 3bp.
• OATs have marginally outperformed bunds at the longer end with the curve flattening by 4bp.
• It is a similar story for BTPs.
• The rally in gilts has been more containged with cash yields 1-2bp lower.
• Speaking earlier today, the ECB's Vasle argued that there is a growing risk that inflation will stay elevated, while Madis Muller reiterated the ECBs official stance that the inflation spike is largely temporary. Meanwhile President Lagarde again stressed that the medium-term inflation outlook is subdued and stated that conditions for a rate hike are unlikely to be met next year.
• The ECB's Elderson, de Cos and Villeroy are due to speak later today.
• The final UK services and composite PMIs for October came in a touch higher than expected (59.1 vs 58.0 and 57.8 vs 56.8, respectively),
• The UK sold GBP2.5bn of the 0.50% Jan-29 gilt. Later today, Germany will offer EUR4bn of the 0% Oct-26 Bobl, the EU will sell EUR1.5bn of 3m bills and Greece will sell EUR625mn of 13-week bills.