EGB/Gilt: ECB Meeting Could Throw Up Some Surprises

European sovereign bonds have traded mixed this morning ahead of today's ECB meeting, while equities continue to build on yesterday's gains.

• The July ECB meeting has taken on significant prominence following the earlier than expected publication of the strategy review this month. Changes to the wording of the monetary policy decision/opening statement are to be expected to reflect both the new formulation of the inflation target (now, officially, symmetric) and the new streamlined and simpler format.
• The shift in communication - both in terms of style and in articulating the new policy formulation - could trigger some volatility. The ECB could also decide to press the issue of 'persistency' in some way, which would present a dovish risk.
• Beyond the UK CBI trends data (mixed), there were no data releases of note and no Gilt/EGB supply.
• Gilts have weakened with cash yields 1-2bp higher and the long end of the curve slightly underperforming.
• Bunds started on a strong footing, before weakening towards closing levels.
• The OAT curve has marginally flattened on the back of the short-end weakening a touch and the longer end firming.