EGB/Gilt

Markets have shifted into a risk-off setting on renewed fears over the economic impact of Covid. Core European sovereign curves have bull flattened alongside broad losses for equities and a resurgent US dollar.

• Gilts have outperformed with yields 6-9bp lower and the curve 3bp flatter.
• The bund curve has similarly bull flattened with the 2s30s spread 3bp narrower.
• OATs trade broadly in line with bunds. The short end of the curve has traded slightly weaker from Friday's close, with the 2s30s spread down 5bp.
• BTPs have underperformed with cash yields up 1-3bp.
• The UK government pushed large parts of the South East of the country, including London, into new Tier 4 restrictions following surging infections and concerns about a new more contagious strain of the coronavirus.
• Governments across Europe have instituted travel bans against the UK.
• The UK Retailing Reported Sales series came in slightly worse than expected for December at -3 vs 0 survey.