EGB/Gilt: UK PM Lumbers On

Euro area government bonds have traded firmer this morning, while gilts have traded mixed. Equities are broadly lower across the region, as is FX vs the dollar.

• UK Prime Minister Boris Johnson survived a no-confidence vote yesterday evening by a comfortable margin (211 vs 148). However, this still means that around 40% of his own party have declared that they have no confidence in Johnson's leadership, suggesting the possibility of further instability in the near term.
• The final estimates of the May Services and Composite PMIs for the UK were higher than the initial readings (53.4 vs 51.8 and 53.1 vs 51.8, respectively)
• Gilts have lacked clear direction so far, while the curve has slightly twist flattened.
• Germany Factory orders disappointed in April (-6.2% Y/Y vs -4.1% expected).
• Bunds have inched higher with yields down 1-2bp across much of the curve.
• OATs have slightly outperformed bunds, with yields down 2-3bp across most of the curve and the 2s30s spread narrowing 3bp.
• BTPs have outperformed core EGBs. Cash yields are 1-5bp lower on the day with the belly of the curve leading the way.
• Supply this morning came from the UK (Gilt, GBP3.00bn), Geramny (ILBs, EUR586mn allotted), Spain (Letras, EUR4.928bn), Belgium (TCs, EUR1.155bn), Netherlands (DTCs, EUR2.72bn), Austria (RAGBs, EUR1.2bn allotted) and the ESM (Bills, EUR1.056bn). In addition, Spain is selling EUR8bn of a 10-year bond with books last seen above EUR40bn).