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EGB/Gilt: Bull Flattening


European government bonds have rallied this morning with gilts outperforming and regional equities selling off.

  • Having yesterday referred to President Putin as a 'murderous dictator' and a 'pure thug', US President Biden will reportedly warn China's President Xi not to actively support Russia. This marks a hardening of the US' position and will further weigh on bilateral relations with Moscow and Beijing.
  • Gilts have traded higher with the curve bull steepening as repricing of the BoE policy meeting following yesterday's relatively dovish hike compounds the impact of geopolitical risk concerns. Yields are now down 5-10bp on the day.
  • Bunds have underperformed gilts, albeit with the curve similarly bull steepening. The 2s30s spread has narrowed 3bp.
  • The short end of the OAT curve has similarly underperformed. Cash yields are 1-3bp lower on the day.
  • BTPs have marginally outperformed core EGBs at the short end. Yields across the curve are 1-4bp lower.
  • Supply this morning came from the UK (UKTBs, GBPbn).
  • There were no tier one European data releases this morning.

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