EGB/Gilt: Geopolitical Tensions Fuel Risk-Off

European sovereign bonds have started the week on a firmer footing with gilts leading the charge. Equities have had a weak session so far, while the USD dollar has gained against G10 FX and oil has inched lower.

• Geopolitical tensions are rising as the Russia-Ukraine crisis deepens and NATO members put their forces on standby.
• Gilts have rallied with cash yields 1-4bp lower and the curve bull flattening.
• Bunds have similarly firmed with yields 2-3bp lower on the day and the belly of the curve marginally flattening.
• OATs have inched higher with yields 1-2bp below the Friday close.
• BTP yields are now 2-3bp lower.
• Preliminary Eurozone PMI data was a touch weaker than expected while still pointing to a sustained expansion in output. Germany notably outperformed expectations with the manufacturing survey hitting 60.5 in January (vs 57.0 survey) while the services component came in at 52.2 and returning to expansion territory.
• Supply this morning came from Germany (Bubills, EUR5.875bn) and the EU (Green EU bond, EUR2.499bn). Later today France will offer EUR4.4-5.6bn of BTFs.