EGB/Gilt: Gilts have been rangebound...>

BOND SUMMARY: EGB/Gilt: Gilts have been rangebound with Bunds on the backfoot.

- The main news this morning is that Donald Tusk, President of the European

Council, has announced that the EU has agreed a Brexit flextension until Jan 31,

2020  - a 3 month extension that can be terminated early if the UK approves the

Brexit deal in the meantime. This is a largely expected but positive development

as it removes the possibility of a no deal Brexit cliff edge this week. Politics

are the driving force for bond markets with the UK parliament to vote today on

when/whether to hold a General Election. The government favours a December 12

election and would hope to pass the Withdrawal Agreement Bill (WAB) and enact

Brexit before parliament is dissolved. However the LibDems/SNP prefer a date of

December 9 which would mean parliament would be dissolved at the end of this

week, not enough time to pass the WAB.

- This morning BTPs are underperforming, although have retraced some of their

losses, after S&P maintained Italy at BBB with a negative outlook on Friday.

- Bund futures are down -0.39 today at 170.96 with BTP futures down -0.57 at

143.77 and Gilt futures down -0.13 at 132.23.