Gilts underperform as UK inflation spikes

Gilt are the clear underperformers in core fixed income markets this morning with 10-year yields up 3.9bp at the time of writing. USTs are higher than yesterday's close while Bunds are a bit lower.

• UK inflation was the highlight of the European morning session with the headline print rising 2.5%Y/Y (2.2% expected) with a similar 0.3ppt surprise in core CPI to 2.3%Y/Y. RPI saw an ever bigger surprise of 0.5ppt to rise to 3.9%Y/Y. The gilt curve has bear steepened with 2-year yields up 1.6bp and 10-year yields up 3.9bp.
• BOE Deputy Governor Cunliffe is due on CNBC at 11:00BST while Ramsden is due to speak at 18:00 (after the market close) and tomorrow will see Saunders make a speech entitled "The Inflation Outlook". The views of all three of these members will be closely watched by the market.
• Elsewhere we have US PPI and the Fed's Beige Book alongside a couple of ECB and Fed speakers later today.
• TY1 futures are up 0-5 today at 133-04+ with 10y UST yields down -2.5bp at 1.392% and 2y yields down -0.4bp at 0.250%.
• Bund futures are down -0.11 today at 174.01 with 10y Bund yields up 0.2bp at -0.293% and Schatz yields up 0.2bp at -0.674%.
• Gilt futures are down -0.51 today at 128.66 with 10y yields up 3.9bp at 0.670% and 2y yields up 1.6bp at 0.101%.