Some retracement of yesterday's rally

Gilts are under pressure this morning. This is largely due to a partial retracement from yesterday's rally but gilts have underperformed Bunds this morning, particularly at he shorter-end of the German curve.

• Last night we had relatively hawkish comments from MPC members Mann and Saunders (both of whom voted for 50bp hikes in February). Mann warned of second round inflation risks and pointed to market expectations for inflation in the UK remaining more persistent than the US or Eurozone. Saunders continues to argue in favour of a quick return of the Bank Rate to a more neutral level.
• 2-year gilt yields are bp higher on the day, but yesterday saw a more than 20bp fall, so this is less than a 50% retracement of yesterday's move. Further out the curve, retracements have been even shallower.
• 2y yields up 8.6bp today at 0.890%
• 5y yields up 7.0bp today at 0.855%
• 10y yields up 4.3bp today at 1.169%
• 30y yields up 5.3bp today at 1.406%
• 2s10s down -4.3bp today at 27.9bp
• 10s30s up 1.0bp today at 23.7bp