EGB/GILT: Markets have pivoted to a....>

BOND SUMMARY: EGB/GILT: Markets have pivoted to a risk-on setting this morning

with core govies selling off, periphery EGBs rallying and equities pushing

higher.

- The focus this morning has been on the much better than expected preliminary

PMI data for June, with the French and UK prints coming in significantly above

consensus.

- Although the surprise in German PMIs was less emphatic than for the French

data, long-end bunds sold off sharply with the 30-year benchmark yield now up

4bp on the day and the curve bear steepening.

- OATs have similarly traded weaker with cash yields 1-3bp higher across the

curve.

- BTPs have rallied and spreads over bunds have narrowed. The 10-year BTP-Bund

spread has traded down to 168bp from a session high of 173bp.

- Gilts trade mixed with yields near yesterday's closing levels.

- Supply this morning came from German (Schatz, EUR4.0bn), the Netherlands (DSL,

EUR1.42bn) and the UK (Gilts, GBP3.25bn).