BONDS: EGBs-GILTS CASH CLOSE: Gilts Outperform Amid Core FI Gains

Core EGBs and Gilts rallied Tuesday amid a broader global safe haven bid.

• There was no evident single trigger for the strong afternoon rally in core FI: factors included lower oil prices (on positive Libyan supply headlines), a drop in tech stocks as the US returned from holiday, and a miss in US data (construction activity and ISM manufacturing).
• A few comments from ECB officials ahead of next week's decision didn't have a major market impact: Nagel said he wouldn't commit in advance on whether he would vote for a cut; Simkus sees a "clear case", however an October cut is "quite unlikely".
• Eurex futures volumes were dominated by Sep/Dec rolls, which are by now at least halfway complete.
• Both the UK and German curves bull flattened. Gilts outperformed global peers, with 15-year Gilt syndication seeing solid demand.
• Periphery EGB spreads closed wider against the risk-off backdrop, with BTPs underperforming.
• Wednesday's schedule includes final August services PMIs and Eurozone PPI, as well as an appearance by ECB's Villeroy.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 4.1bps at 2.38%, 5-Yr is down 5.4bps at 2.171%, 10-Yr is down 6.1bps at 2.277%, and 30-Yr is down 7.3bps at 2.507%.
• UK: The 2-Yr yield is down 4bps at 4.082%, 5-Yr is down 5.2bps at 3.882%, 10-Yr is down 6.5bps at 3.99%, and 30-Yr is down 5.7bps at 4.51%.
• Italian BTP spread up 3.1bps at 146.7bps  / Greek up 2.9bps at 105.5bps