Politics and inflation pushing European yields higher

Bunds are leading fixed income lower today with the most market-positive plausible election results in both Italy and Portugal seen over the weekend. This has been followed up by Spanish CPI coming in six tenths higher than expected and German state CPI also coming in at fairly lofty levels, pointing to an upward surprise of at least 3-4 tenths for the national print due later.

• 10-year Bund yields up 3.9bp on the day with Schatz yields up 4.4bp. Peripheral spreads all tighter, too, led by 10-year BTP-Bund spread 5.3bp tighter on the day (although it was over 10bp tighter earlier). ECB meeting scheduled for Thursday.
• In the UK, focus on politics. Energy price measures (to mitigate the costs to poorer households) were expected to be announced as soon as today. However, multiple media sources now expect the Gray report to be handed to Number 10 today, with a statement likely from PM Johnson this afternoon (which could include a change in Johnson's team). Not moving gilts too much at present which are trading at a lower beta than Bunds to the European news today.
• In the US we look to the MNI Chicago Business Barometer and Dallas Fed to set the tone.
• TY1 futures are down -0-2 today at 127-28+ with 10y UST yields up 1.4bp at 1.786% and 2y yields up 4.2bp at 1.206%.
• Bund futures are down -0.63 today at 169.39 with 10y Bund yields up 3.9bp at -0.8% and Schatz yields up 4.4bp at -0.570%.
• Gilt futures are down -0.24 today at 122.29 with 10y yields up 2.4bp at 1.266% and 2y yields up 2.9bp at 0.992%.