EGB/Gilt: Markets Braced For Further Russia-Ukraine Fallout

Markets have again shifted to a risk-off posture after a further escalation in the Russia-Ukraine crisis.

• President Vladimir Putin announced at the weekend that Russia's nuclear deterrent is on high alert, while the central bank was forced to hike policy rates to 20.0% from 9.50% amid a collapse of the ruble which saw USDRUB at one point trade down 30%.
• Elsewhere, the movement towards further economic sanctions against Russia continued to gain momentum with the US, EU and UK forcing several Russian banks and the central bank out of SWIFT.
• Gilts have traded firmer with the short-end rallying sharply and the curve bull steepening. Cash yields are now 1-8bp lower on the day.
• Bunds opened lower and have retained most of the early gains. Yields are 3-6bp lower across much of the curve, although the very long end has traded below the Friday close. The 2s30s spread has widened 7bp.
• It is a similar story for OATs where the 2s30s spread has traded up 6bp.
• BTPs gave up most of the early gains while continuing to trade marginally above the Friday close.
• Supply this morning came from Germany (Bubills, EUR5.363bn allotted) and the EU (NGEU, EUR2.5bn). Later today France will offer EUR4.6-5.8bn of BTFs.