UK Inflation sets the tone for core FI

The tone was set for the European session by the release of UK inflation data that was two tenths higher than consensus expectations at 5.4%Y/Y (5.1% previously). This drove SONIA futures down on the open, which pulled Bund futures lower and eventually saw gilt futures open at their lowest level since November 2018.

• Soon after the open, however, core fixed income retraced much of its losses although the gilt curve still shows yields across the curve up by about 4.5bp. Bunds have been dragged lower by gilts with the German curve bear steepening while the Treasury curve has seen smaller moves.
• Looking ahead we have four FPC members testifying before the Treasury Select Committee on the Financial Stability Report. Bailey and Cunliffe sit on both the FPC as well as the MPC so their current view on monpol could potentially be discussed.
• TY1 futures are down -0-5+ today at 127-06+ with 10y UST yields up 1.2bp at 1.887% and 2y yields up 1.5bp at 1.060%.
• Bund futures are down -0.38 today at 169.19 with 10y Bund yields up 2.5bp at 0.005% and Schatz yields up 1.0bp at -0.569%.
• Gilt futures are down -0.49 today at 122.28 with 10y yields up 4.7bp at 1.263% and 2y yields up 4.6bp at 0.905%.