EGB/Gilt: Selling Pressure Resumes

Following yesterday's rally, European sovereign bonds have traded lower as the selling pressure from earlier in the week resumes.

• Gilt yields are up 1-4bp across much of the curve.
• The UK's energy regulator has raised the energy price cap as expected by 80% with expectations of further increases in 2023. The continued surge in energy bills elevates the probability of the UK economy sliding in recession and poses an acute dilemma for the government, which is still in the middle of a leadership contest.
• Bund yields are up 2-4bp with the long of the curve flattening 2bp.
• OATs have underperformed bunds with yields up 2-6bp.
• BTPs have underperformed core EGBs with yields up 7-10bp.
• The Jackson Hole event is underway with markets looking for any cues on Fed policy.
• European supply this morning came from the UK (UKTBs, GBP3.5bn) and Italy (BOTs, EUR6bn).