Gilts Outperform On Expected Energy Aid Package

European government bonds have rallied this morning, building on yesterday's gains.

• Policymakers across Europe appear to be making progress on emergency measures to mitigate the impact of the energy price shock, which would ease near term inflationary pressures. Newly installed UK PM Liz Truss is expected to announce a large scale support package to freeze energy bills, which the FT reports could exceed GBP150bn.
• Gilts have outperformed EGBs by a wide margin. Cash yields are 5-24bp lower on the day with the curve sharply bull steepening. The 2-year benchmark is close to experiencing the largest intraday move since the Brexit vote.
• Bunds have firmed with yields 6-8bp lower.
• OAT yields are down 4-8bp with the curve marginally flatter.
• OATs have outperformed core EGBs with yields down 4-11bp.
• Supply this morning came from the UK (Gilt, GBP2.75bn), Germany (1.258bn), and the EU (Bills, EUR2.345bn)