EGB/GILT

Markets have shifted to a risk-off position following escalating no-deal Brexit warnings and news that European drugmakers will delay the rollout of a Covid vaccine.

• Gilts are leading the charge among European majors. Yields are 2-6bp lower on the day with the longer end of the curve outperforming.
• The bund curve has similarly bull flattened with the 2s30s spread 4bp narrower.
• OATs slightly underperform bunds at the longer end. Last yields: 2-year -0.7332%, 5-year -0.7166%, 10-year -0.387%, 30-year 0.3029%.
• BTPs have given up much of the early gains and now trade close to unch on the day.
• Sanofi and GSK have delayed their rollout of a Covid vaccine after stating that it failed to deliver a strong immune response in the elderly.
• European Commission President Ursula Von der Leyen has warned that the probability of a no-deal Brexit is now higher than securing a deal. While both sides continue to talk up their commitment to reach an agreement, both have also ratcheted up warnings of a no-deal risk.
• Belgium sold E350mn of the 0.80% Jun-25 OLO and GBP150mn of the Jun-26 OLO via the Optional Reserve Inquiry (ORI) facility.
• The final German CPI print for November matched the initial estimate (-0.7% Y/Y). Spanish inflation was a touch better than expected (-0.8% vs -0.9% survey).