EGB/Gilt: Lagarde Stresses ECB Will Act Gradually In Response To Inflation

European government bonds have traded mixed this morning following yesterday's sell- off, while equities are broadly lower.

• Having presided over a notably hawkish press conference at the February GC meeting, ECB President Christine Lagarde stressed in an interview published today that rates increases will only occur once asset purchases are ended, and warned that tightening too quickly risked damaging the recovery.
• Bunds have edged higher through the morning with yields now 1-2bp lower on the day.
• OATs similarly now trade marginally above yesterday's close.
• BTPs have sold off with the curve bear flattening. The 2s30s spread has narrowed 3bp.
• The UK economy expanded by 1.0% Q/Q in Q4, a touch below expectations (1.1%) with the monthly print for December showing a 0.2% contraction compared the consensus forecast of -0.5%.
• The gilt curve has twist flattened with yields pushing up 1-3bp at the shorter end and falling 1-3bp at the longer end.
• Supply this morning came from the UK (UKTBs, GBP2bn) and Italy (BTPs, EUR7.75bn).