EGB/Gilt: ECB Gearing Up For Hawkish GC Meeting

European government bonds have continued to sell off, while equities have pared back yesterday's gains.

• The EU has reached an agreement to ban most Russian oil imports. A compromise agreement was reached in which only oil delivered by sea will be banned, allowing pipeline imports to continue following objections from Hungary.
• The May estimate for Eurozone inflation came in above expectations (8.1% vs 7.8% expected).
• The ECB's Ignazio Visco earlier stated that the negative rate policy should now be left behind but that rate hikes still need to be gradual.
• Bunds had a choppy start to session and now trade below yesterday's close. Yields are up 3-4bp with the curve slightly steepening.
• OATs trade in line with bunds. Yields are now 2-4bp higher on the day.
• BTPs have underperformed core EGBs with yields up 5-9bp.
• Gilts have weakened with yields up 1-3bp.
• Supply this morning came from Germany (Bobl, EUR, EUR2.463bn allotted) and Italy (BTP/CCTeu, EUR6.75bn allotted).