Europe Dragging Tsys Lower On PMI Beats

European bonds are lower in early Tuesday trade following stronger-than-expected February flash PMI data.

• Each of the French, German, and Eurozone composite PMIs beat expectations (though services did the heavy lifting, with manufacturing disappointing), followed by a much stronger-than-expected UK print.
• The German and UK curves bear flattened, with ECB and BoE terminal rate expectations rising. Gilts are underperforming, with short-end/belly yields higher by more than 10bp.
• The European core FI move dragged Treasuries lower, with U.S. PMIs and existing home sales the highlights of the data slate.
• ECB's Lagarde is the session's major central bank speaker of note.
• In supply, we get a $42bln 2Y Note auction in the U.S., with Germany selling E5bln of Bobl and Spain selling new 15Y Obli via syndication.

Latest levels:

• Mar 10-Yr futures (TY) down 12.5/32 at 111-19.5 (L: 111-19 / H: 112-00.5)
• Mar Bund futures (RX) down 31 ticks at 134.55 (L: 134.32 / H: 134.97)
• Mar Gilt futures (G) down 53 ticks at 102.51 (L: 102.44 / H: 103.23)
• Italy / German 10-Yr spread 2.7bps wider at 189.6bps