EGB/Gilt: Digesting UK Data & ECB Reaction Function

European sovereign bonds have sold off this morning, with gilts leading the charge. Equities are broadly lower following a mixed Asia session, while the dollar is gaining against G10 FX.

• Gilts have sold off sharply with yields 1-7bp higher on the day and the curve bear steepening.
• UK monthly GDP for January came in better than expected at -2.9% M/M vs -4.9% survey. While industrial production fared a little worse, the index of services data was not as bad as expected. The 40% drop in exports to the EU in January is arguably at the most eye-catching data point from this morning's releases.
• Bunds have traded weaker and have unwound yesterday's ECB-driven rally following the commitment to increasing weekly PEPP purchases. Bund yields are now broadly 1-3bp higher.
• OATs have similarly pushed lower, with the curve 3bp steeper
• BTP yields are 2-3bp higher and trade broadly in line with core EGBs
• Supply this morning came from the UK (Bills, GBP3.5bn).