US MBA: REFIS +10% SA; PURCH INDEX +1% SA THRU SEP 16 WK

European government bonds have got off to a weak start, with equities also trading lower at the beginning of the week.

• Gilts initially opened higher but have progressively sold off through the morning with the curve bear steepening. Cash yields are up 3-8bp.
• According to a report in the FT, chief UK economist at Citi indicated “We now expect CPI inflation to peak at over 18 per cent in January” as a result of successive increases in the household energy price cap. Elsewhere, the Bloomberg average inflation forecast for Q123 has been steadily grinding higher through the year and now stands at 11.0%.
• Bunds opened higher but subsequently sold off towards the Friday close with yields now up 1bp across much of the curve.
• The OAT curve has steepened with the 2s30s spread widening 6bp.
• BTPs have weakened across most of the curve with yields broadly up 2-4bp.
• Supply this morning came from Germany (Bubills, EUR1.98575bn allotted) and Belgium (OLOs, EUR2.001bn). The EFSF is selling a new Dec-25 bond for EUR4bn and tapping the 2.375% Jun-32 bond for EUR1.5bn via syndication.