EGB/Gilt: EGBs Under Pressure

European sovereign bonds have broadly traded weaker this morning alongside fresh downside for equities. Lingering uncertainty over whether Evergrande will pay an interest payment to bondholders has contributed to an unfavourable risk backdrop.

• The gilt curve has steepened on the back of the short-end firming and yields inching higher at the longer end. The 2s30s spread has widened 2bp on the day.
• Bunds have traded weaker with cash yields 1-2bp higher across much of the curve.
• OAT yields are similarly up 1-2bp on the day.
• BTPs have underperformed core EGBs with yields pushing up 3-5bp and the belly of the curve leading the way.
• The German IFO report for September was slightly mixed. The Current Assessment and Business Climate components were a touch weaker than expected, while the Expectations component surprised higher (97.3 vs 96.5 survey).
• Supply this morning came from the UK (UKTBs, GBP2bn) and Italy (BTP Short Term E2.5bn, BTPei EUR1bn).