EGB/Gilts: Bonds are on the backfoot...>

BOND SUMMARY: EGB/Gilts: Bonds are on the backfoot this morning following a

better than expected China Caixin PMI services and headlines that the US and

China are close to agreeing a trade deal. The Shanghai composite index has

closed up 1.24% today and European stocks are rallying on the open.

- The Spanish PMI services has already come out better than exp with the other

Eurozone PMI services prints due shortly. Eurozone retail sales are also out

today. In the UK, the PMI services will be the highlight following the good

manufacturing PMI (largely fuelled by stockpiling). US ADP employment will also

be closely watched globally following last month's disappointing NFP print.

- On the political front, UK PM May is to meet Labour leader Corbyn for talks

today to try and find some common ground on Brexit.

- Bund futures are down 0.54 at 165.55 with 10y yields 3.6bp higher at -0.012%

and Schatz yields up 1.5bp at -0.593%. Peripheral spreads are generally a little

tighter on the day, with the exception of BTP-Bund spreads which has continued

to drift wider. Gilt futures are down 0.73 at 128.60 with 10y gilt yields up

6.1bp at 1.065% and 2y yields up 4.4bp at 0.677%.