EGB/Gilt: Growth Slowdown Underpins FI Rally

European government bonds have rallied sharply this morning while regional equity performance has been mixed.

• Preliminary European PMI data for June came in significantly below expectations and indicate a slowdown in economic activity across the region at a time when central banks have turned increasingly hawkish in a bid to tame inflation.
• Gilts rallied early into the session and have held on to most of the morning's gains. Cash yields are 11-13bp lower on the day.
• It is a similar story for bunds where the belly of the curve has outperformed. Yields are now 14-21bp lower.
• The belly of the OAT curve has also outperformed with yields down 14-19bp.
• The BTP curve has bull steepened with the 2s30s spread widening 5bp.
• EU leaders are meeting in Brussels where they are widely expected to approve Ukraine's candidate status to join the bloc. This would mark the first step towards eventual membership and would further inflame tensions with Moscow.