Asset liability matching demand from pension funds will support the longer end and assuming the ECB hikes rates aggressively, we might see a flat yield curve by April.

The Fed will definitely be raising the rate at the end of this month, and it's certainly possible we'll get a second rate increase later. With some supply pressure, that will also lead to higher yields.

The ZEW indicator is at levels which previously have marked a high, and discussion will now start on whether the ECB will hike rates earlier than in March. This will put the front-end under pressure.

In the near term, the gilt market will react to any economic data release that helps shape investors' BOE view. The annual growth figure was lower than expected, showing continuation of declining growth.

In all likelihood, disappointing data will at some point in time dampen rate hike expectations. There's a reasonably good chance for yields to move substantially lower over the course of this year.

What we are seeing currently is that it's not a one-way road for strong economic data. Ten-year yields could fall to 3.35 percent in a month.