EGB/Gilt: Inflation Expectations Pushing Higher

European government bonds continue to trade weaker this morning with gilts underperforming EGBs and regional stocks broadly edging lower.

• Russia has seized the port city of Kherson while the city of Mariupol is encircled. The EU is reportedly preparing a fresh raft of sanctions against Russia
• Commodity prices continue to push higher - Brent crude now trades at USD115.28/bl - and are underpinning the surge in breakevens and the benchmark EUR5y5y forward inflation swap.
• Gilt yields are 7-9bp higher on the day with the curve slightly bear flattening.
• The bund curve has similarly bear flattened. Cash yields are 1-4bp higher while the 2s30s spread has narrowed 3bp.
• OATs trade broadly in line with bunds.
• BTP yields are up 7-11bp with the 5-year benchmark significantly underperforming the curve.
• Supply this morning came from France (OATs, EUR9.999bn) Spain (Bono/Obli/Green Obli/Obli-Ei, EUR5.599bn).
• Final PMI estimates for February were broadly a touch low than the flash prints for the UK and the Euro area aggregate. The updated numbers for Italy were a touch better, while the Spanish estimates surprised (Services: 56.6 vs 51.6, Composite: 56.5 vs 52.0).