EGB/Gilt: Sell-Off Continues As Global Rate Hike Expectations Ratchet Up

European government bonds continue to push lower alongside losses for equities and G10 FX vs the dollar.

• Gilts initially opened lower and subsequently traded sideways through the morning. Cash yields are up 5-7bp. Sterling is coming under fresh pressure, further fueling imported inflation and raising the ante on the Bank of England's MPC.
• The bund curve has bear steepened with yields up 2--7bp and the 2s30s spread 5bp wider.
• OATs have similarly underperformed at the longer end with the curve 3bp steeper.
• BTP yields are up 3-9bp with the very long end of the curve 5bp steeper.
• Some reports emerged this morning indicating that the European Commission is looking into the possibility of energy price caps in order to mitigate some of the impact of higher energy prices on households.
• Final PMI data for August affirm that the manufacturing sector in much of Europe is either experiencing a fall in output, or teetering on the edge of contraction.
• Supply this morning came from the UK (Gilt, GBP2bn), France (OATs, EUR9.998bn), Spain (Bono/Obli/Obli-Ei, EUR5.37bn), Ireland (IGBs, EUR1.25bn) .
• Focus now shifts to the US ISM manufacturing data for August published later today.