EGBs-GILTS CASH CLOSE: Bear Steepening Defies Risk-Off Mood

The German and UK curves bear steepened Monday despite a general risk-off environment (equities lower, BTP spreads wider). Largely following moves in USTs and little in the way of key triggers in Europe.

• BoE's Tenreyro spoke explicitly on applicability of -ve rates in the UK. Arguably increasingly relevant given PM Johnson's comment that more COVID lockdown measures could be put in place, weakening the economy (Chancellor Sunak had little detail on potential relief).
• No key data today, and the supply slate consisted of EFSF syndication of dual 10-/30-Yr tranches. Tuesday sees a very heavy slate, with Netherlands, UK, Austria, Germany all coming to market and likely Belgium 10-Yr syndication as well.

Closing Levels / 10-Yr Periphery EGB Spreads:

• Germany: The 2-Yr yield is up 0.2bps at -0.699%, 5-Yr is up 1.4bps at -0.716%, 10-Yr is up 2.3bps at -0.496%, and 30-Yr is up 3.6bps at -0.09%.
• UK: The 2-Yr yield is up 1.1bps at -0.117%, 5-Yr is up 1.2bps at -0.032%, 10-Yr is up 2.1bps at 0.309%, and 30-Yr is up 3.3bps at 0.903%.
• Italian BTP spread up 1bps at 106bps / Spain down 0.6bps at 55.4bps