Heavy European supply; Italian politics and tomorrow's Fed meeting

After yesterday's risk-off moves, we have retraced around a quarter to a third of yesterday's move higher in core fixed income. Equities have also moved to the front foot.

• It has been a heavy morning for European supply again with the highlight a E14bln dual-tranche syndicated offering of EU SURE bonds with the Netherlands, Italy and the UK all coming to market today.
• There has been continued focus on Italian politics with Prime Minister Conte set to resign and seek a mandate from President Mattarella to try and form a new coalition.
• The market will continue to look ahead to tomorrow's FOMC meeting where the FOMC is likely to use the January meeting to reflect on developments over the previous six weeks and assess how they may impact the medium-term economic and monetary policy outlook. See our Fed preview for more.
• TY1 futures are down -0-1+ today at 137-10+ with 10y UST yields up 1.5bp at 1.046% and 2y yields unch at 0.122%.
• Bund futures are down -0.14 today at 177.69 with 10y Bund yields up 0.8bp at -0.543% and Schatz yields up 0.4bp at -0.727%.
• Gilt futures are down -0.18 today at 134.55 with 10y yields up 1.7bp at 0.278% and 2y yields up 0.5bp at -0.135%.