EGB/Gilt: Modest Retracement Following Strong Gains

European government bonds have traded weaker this morning, but the correction has been modest compared to the sizeable gains made in recent days. European equities are higher and DM currencies are gaining ground against the USD.

• Gilts have traded lower with the curve bear flattening. Cash yields are up 1-4bp.
• While headline May retail sales data for the UK was a touch worse than expected in annualized terms, the ex auto fuel series reported a significant miss versus consensus (-5.7% Y/Y vs -5.0%).
• Pressure on UK Prime Minister Boris Johnson continues to mount after the ruling Conservative party lost two by-elections to Labor and the Liberal Democrats.
• The bund curve has shifted higher with yields up 4-5bp.
• OATs are underperforming bunds at the longer end. Yields are up 2-8bp on the day with the 2s30s spread widening 3bp.
• BTP yields have pushed up 2-7bp with the belly of the curve underperforming.