EGB: Russia-Ukraine De-Escalation Provides S/T Reprieve

Tentative signs of a modest de-escalation in the Russia-Ukraine crisis has underpinned the relief rally in stocks and weaker trading in EGBs.

• Although the situation remains fluid, Moscow's decision to pull back some troops from the Ukrainian border markets a positive step in the short term.
• Bunds initially opened higher, but have sold off through the morning with the curve bear steepening. Cash yields are 1-3bp higher on the day with the 2s30s soread widening 2bp.
• OATs have traced out a similar path with the curve steepening 2bp.
• The BTP curve has twist steepened with the 2s30s spread edging up 3bp.
• The preliminary Q4 GDP print for the eurozone was a touch weaker than expected (0.3% Q/Q vs 0.4% expected).
• European supply this morning came from the UK (Gilts, GBP2.25bn), Germany (Bobl, EUR3.247bn allotted), Spain (Letras, EUR1.9bn). The ESM also plans to sell EUR1.1bn of 6m bills.
• In addition, syndicated auctions have been held by Belgium (1.70% Jun-50 OLO, EUR5bn with book size last seen above EUR24bn), the Netherlands (0.50% Jul-32 DSL with books size last seen above EUR20bn).