EGB/Gilt: Weaker Trading Ahead of ECB Meeting Tomorrow

European government bonds have traded weaker this morning while equities have inched lower and the dollar has made incremental gains against G10 FX.

• Gilts have traded lower with yields up 3-4bp on the day.
• Bund yields have pushed up 4-5bp and are trading near the highs of the morning.
• It is a similar story for OATs where yields are now up 4-6bp and the belly of the curve marginally underperforming.
• BTPs have underperformed core EGBs, particularly in the belly of the curve. Yields are up 5-8bp now.
• The final estimate of Q1 GDP for the euro area was revised higher from the previous reading (5.4% Y/Y vs 5.1% expected, 0.6% Q/Q vs 0.3%).
• Supply this morning came from the UK (Gilt, GBP2.5bn), Germany (Bund, EUR3.266bn allotted) and Portugal (OT, EUR750mn).
• Italy conducted a buyback of BTP Italia bonds.
• Focus turns to the ECB tomorrow with President Lagarde expected to announce the end of net purchases under the APP in early July and indicate that rate lift-off will occur later that month, in line with her recent blog post. With the policy direction well telegraphed at this point, markets will be looking for any indication of a potential 50bp hike.