Risk-on and inflation expectations driving core FI

A combination of risk-on sentiment (on hopes of Omicron developments) and higher inflation expectations (with European gas prices still close to yesterdays highs - despite being lower intraday) have helped core fixed income lower.

• Gilts are the biggest movers, with the curve moving in a fairly parallel fashion as yields rise around 4bp. SONIA futures have seen Whites move up to 4 ticks lower on the day (up to 10 tick 2-day move), Reds move 4.5-5.5 ticks lower on the day (11.5-15.0 tick 2-day move) and Greens/Reds 5.5-6.5 ticks lower on the day (16.5-19.5 tick 2-day move).
• The German curve has bear steepened, with Euribor futures a little lower on the day (Greens/Blues down 8-10 ticks over 2 days now). 10-year yields are up 2.7bp while BTP-Bund 10-year spreads are 2.9bp wider on the day.
• TY1 futures are little changed on yesterday's lows, having reversed some of the overnight move higher to not sit close to their lows of the day. The UST curve has bear steepened a little.
• European gas prices will remain in focus, alongside any Omicron developments.
• TY1 futures are up 0-1 today at 130-19 with 10y UST yields up 1.7bp at 1.480% and 2y yields up 0.9bp at 0.678%.
• Bund futures are down -0.26 today at 173.05 with 10y Bund yields up 2.1bp at -0.288% and Schatz yields up 0.7bp at -0.714%.
• Gilt futures are down -0.29 today at 125.53 with 10y yields up 3.4bp at 0.905% and 2y yields up 3.5bp at 0.639%.