EGBs-GILTS CASH CLOSE: UK-EU Deal Intrigue Sets Tone Once Again

A sideways day for Bunds and Gilts, though periphery spreads tightened, led by Italy. Most of the day's intrigue revolved around EU-UK deal speculation; early news that Barnier's team would visit London starting Weds seen as positive; later, Gilts rallied on a BBG sources story that the EU would call the UK's bluff and ignore the Oct 15 'deadline' for a deal.

German Aug Factory orders exceeded expectations (confirming positive manuf sector). Plenty of ECB speak w Lagarde, de Cos and Lane, but nothing market-moving.

Closing levels:

• Germany: The 2-Yr yield is up 0.6bps at -0.694%, 5-Yr is up 0.4bps at -0.702%, 10-Yr is up 0.3bps at -0.507%, and 30-Yr is unchanged at -0.078%.
• UK: The 2-Yr yield is up 0.1bps at -0.02%, 5-Yr is unchanged at -0.034%, 10-Yr is down 0.1bps at 0.287%, and 30-Yr is unchanged at 0.869%.

10-Yr Periphery EGB Spreads:

• Italian BTP spread down 3.5bps at 128.3bps
• Spanish bond spread down 2.8bps at 74.3bps
• Portuguese PGB spread down 1.9bps at 73.6bps
• Greek bond spread down 0.8bps at 148.2bps