August 17, 2022 10:53 GMT
European government bonds have sold off sharply this morning alongside losses for equities and G10 FX vs the dollar.
- UK inflation data surprised higher in July and has breached into double-digit territory for the first time in around 40 years. The headline print came in at 10.1% Y/Y (vs 9.8% expected) and marks a significant acceleration from the 9.4% reading from the previous month with no let up in the surge in the energy price component.
- Elsewhere, the ONS reported a slowdown in house price growth in June (7.8% Y/Y vs 12.8% the previous month).
- Gilts have progressively sold off through the morning with the curve sharply bear flattening. Cash yields are now 10-20bp higher on the day with the 2s30s spread 9bp narrower.
- The preliminary read on Eurozone GDP for the second quarter was a touch weaker than expected (0.6% Q/Q vs 0.7% & 3.9% Y/Y vs 4.0% survey).
- Bunds have lagged the move in gilts with cash yields up 7-13bp.
- OAT yields are up 5-12bp.
- BTPs have underperformed core EGBs with yields up 8-17bp.
- Focus later data shifts to US retail sales data for July.