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EGB/Gilt: Gilts Under Pressure

BOND SUMMARY

EGBs have firmed this morning while gilts have sold off alongside modest gains for equities.

  • Gilt yields have pushed up 2bp across the curve, which trades close to flat overall.
  • Bunds are broadly a touch firmer on the day.
  • It is a similar story for OATs, which trade marginally above yesterday's close.
  • BTPs have slightly outperformed core EGBs with cash yields 1-2bp lower,
  • The ECB's Robert Holzman earlier stated that he was clinging to the hope that the inflation spike is temporary. For the time being, the official line is still that the surge in inflation reflects transient factors, although this view is coming under increasing pressure in the face of higher oil prices and calls for higher wages.
  • Supply this morning came from the UK (Gilts, GBP.8.5bn), Germany (ILBs, EUR500mn allotted), Spain (Letras, EUR4.991bn), Austria (RAGBs, EUR1.266bn), Belgium (TCs, EUR1.00bn) and the ESM (Bills, EUR1.5bn).

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