EGB/Gilt: Hawkish CB Speak Fuels Sell-Off

European government bonds have sold off sharply this morning with UK leading the charge following hawkish comments yesterday from BoE Governor Andrew Bailey.

• Speaking to the House of Commons Treasury select committee, the BoE's bailey stated “To forecast 10 per cent inflation and to say there isn’t a lot we can do about it is an extremely difficult place to be . . . This is a bad situation to be in", in addition to warning about the risk of an 'apocalyptic' rise in food prices.
• Gilts opened lower and have remained under pressure. Cash yields are now up 4-15bp with the curve bear flattening.
• Adding to the hawkish narrative on monetary policy, the ECB's Klaas Knot this morning stated that normalising monetary policy was 'the only option' and that a larger than 25bp hike could be justified by the data, stating specifically the potential for "half a percentage point".
• Bunds have sold off across the curve with cash yields pushing up 5-9bp.
• The OAT curve has bear flattened with the 2s30s spread narrowing 3bp.
• BTPs trade broadly in line with core EGBs with yields up 7-10bp on the day.
• Supply this morning came from the UK (Gilt, GBP1.75bn), Germany (Schatz, EUR4.115bn allotted), Finland (RFGB, EUR996mn) and the ESM (Bills, EUR1.007bn)