Core FI reacts to risk off, but EGB peripheral spreads tighten

Covid concerns have been the driving factor for core fixed income markets this morning with Treasuries, Bunds and gilts all higher on the day. There has been some pullback off the highs, particularly for Bunds despite the worse than expected German IFO print.

• In contrast to the risk off moves seen in core FI, Eurozone peripheral spreads are all tighter on the day, generally by around 2bp but with the notable exception of Italy. BTPs saw a strong rally on the open after the decision by S&P to maintain the BBB rating of Italy and upgrade the outlook from negative to stable. 10-year BTP spreads are around 6.3bp tighter on the day at the time of writing.
• The calendar is pretty light today but we have a busy week ahead. Barnier has stayed in London for further Brexit talks - he had been due to leave yesterday but will now stay until Wednesday in what is seen as a positive development. The ECB meets this week and will announce its latest decision and hold its press conference on Thursday. Furthermore, a number of European countries will publish their first estimate of Q3 GDP on Friday. Of course, the US election is next week, too, so polling data will be closely watched too.
• TY1 futures are up 0-5 today at 138-16+ with 10y UST yields down -3.2bp at 0.812% and 2y yields down -0.6bp at 0.150%.
• Bund futures are up 0.20 today at 175.46 with 10y Bund yields down -0.5bp at -0.582% and Schatz yields down -0.3bp at -0.766%.
• Gilt futures are up 0.22 today at 135.59 with 10y yields down -1.5bp at 0.264% and 2y yields down -0.4bp at -0.43%.