EGB/Gilt - UK Budget Day, Bond Selling Continues

EGBs have sold off this morning and curves have bear steepened alongside gains for equities and energy.

• Today is budget day in the UK. Chancellor of the Exchequer Rishi Sunak is expected to talk tough on the need to restore fiscal sustainability. Given that the economic recovery is still in the nascent stages, and with Tory backbenchers pushing back against tax rises, big ticket changes are unlikely. Focus will be on possible extension of Covid support schemes and potential adjustments to corporation tax.
• Gilts have weakened heading into the budget with yields 2-3 higher on the day and the curve 1-2bp steeper.
• Bloomberg earlier reported that ECB policymakers saw no need to react to the recent surge in bond yields.
• Bund yields are up 1-3bp with the curve 3bp steeper. Last yields: 2-year -0.7001%, 5-year -0.6377%, 10-year -0.3342%, 30-year 0.1711%.
• BTPs have traded broadly in line with core EGBs with the curve similarly bear steepening and 2bp steeper
• Supply this morning came from Germany (Bund, EUR2.595bn).