EGBs-GILTS CASH CLOSE: BTP Spreads Plummet, UK Short-End Gets Hit

BTP spreads continued to compress on reduced political risk, with the 10-Yr narrowing to tightest levels since February vs Bunds.

The other standout move was at the short end of the UK curve, which sold off as BoE Gov Bailey pushed back against negative rate speculation; the curve bear flattened. In contrast, Germany's curve bear steepened.

After a thin start to the week data-wise, Wednesday's main event will be Sep flash PMIs. Closing levels:

• Germany: The 2-Yr yield is up 1.2bps at -0.713%, 5-Yr is up 1.8bps at -0.71%, 10-Yr is up 2.5bps at -0.505%, and 30-Yr is up 4bps at -0.055%.
• UK: The 2-Yr yield is up 7.1bps at -0.05%, 5-Yr is up 6bps at -0.077%, 10-Yr is up 4.6bps at 0.203%, and 30-Yr is up 3.3bps at 0.751%.

10-Yr Periphery EGB Spreads:

• Italian BTP spread down 7.7bps at 137.1bps
• Spanish bond spread down 4.3bps at 74bps
• Portuguese PGB spread down 3.7bps at 76.3bps
• Greek bond spread down 4.9bps at 156.2bps