EGB/Gilt: Hawkish ECB Rhetoric Underpins EGB Selling

European government bonds have sold off this morning, underpinned by hawkish commentary from ECB policymakers which has fueled expectations of a rate rise in the coming months.

• Gilts opened lower and have sold off across most of the curve, although there has been some marginal twist flattening at the long end where bonds have inched above yesterday's close. Cash yields at <10y maturity are 3-5bp higher, while yields at longer maturity are close to flat on the day.
• Bunds have sold off across the curve with yields 3-9bp higher and with the short-end underperforming.
• OATs have traced out a similar path with yields now up 1-9bp.
• BTPs have slightly lagged the sell-off in core EGBs. Yields across most of the curve are higher on the day by 1-7bp, while the very long-end has firmed.
• Luis de Guindos earlier suggested that a rate hike was possible in July, depending on the data, while President Lagarde indicated that inflationary risks are tilted to the upside in the short run.
• The final estimate of Eurozone CPI in March was revised slightly lower compared to the initial reading (Headline: 7.4% Y/Y vs 7.5% previously; Core: 2.9% vs 3.0%).
• Supply this morning came from France (OATs, EUR10.989bn; OATi/OATei, EUR1.498bn), Spain (Bono/Oblis, EUR5.541bn), and Ireland (IRTBs, EUR750mn)
• Focus this afternoon shifts to US initial jobless claims data and the Philly Fed survey.