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10-year yields highest levels since January 2016

  • 10-year gilt yields hit their highest levels since January 2016 earlier (1.8462%) but have since moved back around 2.5bp off those peaks, albeit remaining 7.3bp higher on the day.
  • The moves have largely been driven by external factors with the French first round presidential result favouring Macron a little more than the polls suggested, leading to a relief sell-off in core fixed income globally.
  • This has also been accompanied by pricing in more to the front-end, particularly in Europe. Although for the UK, moves in 2-year yields were smaller than for 10-year so we have seen a bear steepening of the curve.
  • It's a big week for the UK with labour market data due tomorrow morning and inflation data due Wednesday. On top of that we also have a GBP2.5bln auction of the benchmark 10-year tomorrow, that could potentially see a relatively wide tail if markets continue to move as much as today.
  • 2y yields up 5.9bp today at 1.529%, 5y yields up 6.3bp at 1.589%, 10y yields up 7.5bp at 1.823%, 30y yields up 6.7bp at 1.964%.
  • 2s10s up 1.6bp today at 29.4bp, 10s30s down -0.8bp at 14.1bp

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