EGB/Gilt: Adjusting To The FOMC

It has been a mixed session so far for European government bonds following an initially strong start. The broader narrative is still anchored to the post-FOMC reassessment of inflation.

• OATs have outperformed this morning with yields 1-2bp lower. A poor showing in regional elections for President Macron and his far-right rival Marine Le Pen has given markets pause for thought ahead of the 2022 presidential election, which could be more fractured than people initially thought.
• Bunds initially traded firm but soon return to the Friday close.
• Gilts similarly trade close to flat on the day having initially opened higher.
• The Daily Telegraph reports that UK Treasury officials are looking into potential reforms to pension taxation as a possible tool for restoring the public finances in the aftermath of the pandemic. Such reforms, if pursued, would be a difficult sell for the Tory party, which was last week left unnerved by the loss of its Amersham and Chesham seat to the Lib Dems.
• Supply this morning came from Germany (Bubills, EUR5.274bn allotted), Netherlands (T-Bills, EUR2.92bn) and Slovakia (SlovGBs, EUR561mn).
• There are no Tier 1 European data releases today.