European government bonds pared some of the selloff it saw this morning following Powell's 'retirement' of the transitory inflation narrative! led by the Italian curve that sharply underperformed and out-flattened the core, with the BTP-Bond spreading touching a 13-month high intraday (137bp) to then close ev4bp wider on the day. All curves steepened in the front end earlier in the day, but both Bunds and BTPs still ended the day flatter and so did the long end across the board.
UBS Strategy
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