EGB/Gilt: Hawkish ECB Momentum Continues To Build

European government bonds have traded weaker alongside gains for equities, marking a reversal from yesterday's risk-off move.

• Adding to the increasingly hawkish chorus at the ECB, Madis Muller stated today that there needs to be focus on fighting high inflation, Martins Kazakhs said he 'hopes' an interest rate increase occurs in July, while Ignazio Visco argued that rates can rise gradually in the coming months and that a June hike is not out of the question.
• Bunds have sold off and the curve has bear steepened. Cash yields are up 3-8bp while the 2s30s spread has widened 5bp.
• OATs have slightly underperformed bunds on the day, particularly at the longer end.
• BTPs have underperformed core EGBs with yields up 5-10bp.
• UK retail sales data for April came in better than expected (Ex Fuel, 1.4% M/M vs -0.2% expected & -6.1% Y/Y vs -8.3%), while the GfK consumer confidence series hit a new record low of -40 in May.
• Gilt gilts are 6-7bp higher with the curve trading close to flat overall.
• Supply this morning came from the UK (UKTBs, GBP2.0bn)