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European equities have stabilized this morning following yesterday's heavy selling, while government bonds continue to make gains. Given that the potential impact of the Delta variant on economic activity remains unclear, today's respite for equities may prove fleeting.

  • Gilts remain bid and the curve continues to bull flatten. Cash yields are now 3-4bp lower on the day.
  • Bunds have marginally outperformed gilts at the longer end with the 30-year benchmark yield down 5bp on the day.
  • OATs have firmed with the 2s30s spread narrowing 2bp.
  • Having initially sat on the sidelines yesterday morning amid the rally in core EGBs, BTPs are now catching up. Yields are now broadly 1-3bp lower across the curve.
  • Supply this morning came from the UK (Gilt, GBP1.25bn), Germany (Bund, EUR3.349bn allotted) and the ESM (Bills, EUR1.492bn).
  • There were not tier one data releases this morning.