EGB/GILT

Markets trade risk-off this morning with European govies rallying, equities edging lower and the dollar on the front foot.

• Concern continues to mount over Brexit negotiations following yesterday's news that the government in Westminster is seeking to pass new legislation which could undermine elements of the hard-fought Withdrawal Agreement. While Downing Street has tried to play down these concerns, EC President Ursula von der Leyen stressed "I trust the British government to implement the withdrawal agreement, an obligation under international law & prerequisite for any future partnership." In the latest twist, the head of the UK government's legal department has quit in response to the proposed legislation.
• Supply this morning came from the Netherlands (DSL, EUR2.25bn), Austria (RAGBs, EUR1.15bn), Spain (Letras, EUR6.35bn), Belgium (TCs, EUR2.62bn), Finland (Bills, EUR1.485bn) and the ESM (Bills, E2bn).
• Italy is also syndicating a new 20-year BTP with order books north of EUR70bn.
• Gilt cash yields are 3-5bp lower and the curve has bull flattened
• Bunds have rallied, but slightly underperform gilts on the day. The 2s30s spread is 3bp narrower.
• OATs trade in line with bunds with the curve ~ 3bp flatter. Last yields: 2-year -0.6288%, 5-year -0.5816%, 10-year -0.1897%, 30-year 0.5101%.
• BTPs have similarly rallied, albeit with yields broadly within 1bp of yesterday's closing levels.