Bunds yields lowest levels since March on Covid/US fiscal concerns

Risk-off sentiment has been driving markets with Covid-19 concerns and US fiscal stimulus hopes fading. Equities have sold off with core fixed income rallying and peripheral spreads widening.

• Covid-19 cases continue to pick up, particularly in the UK and Europe. The UK is reported to be imminently placing London in Tier 2 restrictions and several parts of the north into the highest Tier 3 restrictions. President Macron has announced a curfew for Paris in the evenings while Germany has recorded its highest daily increase in Covid-19 cases since the pandemic began.
• On the US side, Mnuchin has confirmed that it will be difficult to get any agreement on fiscal stimulus before next month's elections.
• In core fixed income Bunds are outperforming both Treasuries and gilts. Bund yields have broken below the May 5 low of -0.591% and now are at their lowest levels since March 13 - a period when Covid-19 was starting to escalate in Europe and at a stage when markets were recovering a little after becoming dysfunctional.
• Later today there will be a number of Fed speakers, Empire manufacturing, claims data and the Philly Fed.
• TY1 futures are up 0-5 today at 139-12 with 10y UST yields down -2.8bp at 0.698% and 2y yields down -0.5bp at 0.136%.
• Bund futures are up 0.61 today at 175.96 with 10y Bund yields down -3.6bp at -0.618% and Schatz yields down -2.0bp at -0.770%.
• Gilt futures are up 0.40 today at 136.47 with 10y yields down -3.0bp at 0.188% and 2y yields up 0.2bp at -0.50%.