EGB/Gilt: Still Offered

European government bonds have sold off this morning with gilts leading the charge. Absent any obvious catalysts, the move likely reflects a reassessment of the Omicron variant.

• Gilt yields are now 4-5bp higher with the curve slightly bear steepening.
• The long-end of the bund curve has similarly underperformed with the 2s30s spread widening 5bp.
• The OAT curve has steepened further as a result of the short-end going bid and the longer-end selling off. 2s30s is now 7bp wider.
• BTPs have similarly traded weaker with cash yields 3-5bp higher on the day and the belly of the curve slightly underperforming.
• Speaking to Sky News earlier, UK PM Boris Johnson stated that the Omicron variant appears to be milder than the Delta strain of Covid-19, reiterating recent indications that the current wave may be less severe than initially feared.
• Greece sold EUR487.5mn of 6-month bills at an average yield of -0.46% and bid-to-cover of 2.98x.
• Netherlands announced that it will sell up to EUR1.5bn of 4-month DTCs and EUR1.55bn of 6-month DTCs at the scheduled Jan 3 auction.