EGB/Gilt: US CPI Comes Into Focus

European government bonds sold off early in the session before starting to recoup losses.

• Expectations for more aggressive monetary policy normalisation continue to underpin weaker trading in sovereign bonds, with this afternoon's US CPI print for March providing a further potential catalyst.
• Gilts have recovered most of the earlier losses while still trading slightly below yesterday's closing levels. Cash yields are broadly 1-2bp higher on the day.
• It is a similar story for bunds where the curve is 2bp steeper.
• The OAT curve has slightly twist steepened on the day with the 2s30s spread widening 1bp.
• BTPs have fully recovered the day's losses and now trade above yesterday's close. Cash yields are down 1-2bp.
• Supply this morning came from the UK (Gilt, GBP2.50bn), Germany (Schatz, EUR4.453bn), Italy (BOT, EUR6.5bn), the Netherlands (DSL, EUR2.505bn), Belgium (TCs, EUR 2.6bn) and the ESM (Bills, EUR854.8m).
• The final German CPI estimate for March matched the initial reading (7.6% Y/Y)