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EGB/Gilt: Eurozone Inflation Continues To Push Higher

BOND SUMMARY

European sovereign bonds started the session on a firm footing but traded weaker through the morning with performance now mixed on the day. Equities continue to push higher while recent dollar weakness persists.

  • Gilts have traded weaker through the morning and are now close to flat on the day.
  • The leadership of the UK's PM Boris Johnson continues to hang in the balance amid further revelations about parties held during lockdown. Former minister Tobias Ellwood is reportedly the latest to submit a letter of no confidence.
  • Bunds have given back early gains and now trade below yesterday's close with cash yields 1-2bp higher on the day across much of the curve.
  • The OAT curve has twist flattened with the 2s30s spread narrowing 2bp.
  • The BTP curve has bear flattened with yields at the short-end/belly up 1-2bp.
  • Eurozone inflation continued to push higher in January, coming in at 5.1%, up from 5.0% and defying expectations for a sharp slowdown to 4.0.%. Similarly, preliminary January CPI data for Italy came in stronger than expected (5.3% Y/Y vs 4.0% consensus).
  • Supply this morning came from Greece (GTBs, EUR625mn). Italy is also selling a 10-year BTPei via syndication with a coupon of 0.4% and book size last seen above EUR18bn.
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