Sit Off Session Bests, Long End Yields Remain Lower On Day

Core EGBs are off strongest levels but yields on cash benchmarks at the mid/long end remain lower on the day, with Bunds outperforming USTs across the curve.

• The uptick in 1Y inflation expectations to 4.0% (from 3.5%) in the ECB's latest consumer survey aided the move off session bests, but we note that the 0.5pp rise appears to be largely due to a sizeable jump in Spanish expectations .
• Bund futures are up 0.22 ticks today at 130.55, with 10y generic Bund yields down -1.2bp at 2.646% and Schatz yields up 1.9bp at 2.003%. E4bln supply of the benchmark 10Y Bund at 1030GMT will have also weighed.
• There has been little market impact from ECB-speak this morning, though Lane stating that we "should not take a lot of comfort from inflation at 2.9%" is of some note given his dovish leanings. Eurozone retail sales fell broadly in line with expectations.
• Periphery spreads sit wider to Bunds at typing, most notably in Portugal, as political uncertainty arising from ex-PM Costa's resignation yesterday continues to weigh on PGBs. The generic 10Y PGB/Bund spread sits 1.9bps wider on the day at 75.3bps while the BTP/Bund spread is 0.9bps wider at 190.1bps.
• The remainder of today's docket includes ECB-speak from Nagel, De Cos and Vujcic.