EGBs-GILTS CASH CLOSE: Bull Flattening As Brexit Intrigue Continues

Strong bull flattening in both the Bund and Gilt curves on Tuesday, though the UK outperformed as Brexit intrigue continued, with no macro drivers otherwise. Periphery spreads traded sideways.

• News that the EU and UK had reached an agreement on the outstanding issues in the Withdrawal Agreement was treated fairly equivocally, initially modestly bearish Gilts but that move faded.
• More attention on repeated reports that EU's Barnier saw odds of a deal as slim.
• Main focus is on PM Johnson's upcoming trip to Brussels, timing still TBD. Wednesday's calendar looks thin, with supply (UK and German auctions) the main area of interest.

Closing Levels / 10-Yr Periphery EGB Spreads:

• Germany: The 2-Yr yield is down 1.4bps at -0.773%, 5-Yr is down 1.7bps at -0.794%, 10-Yr is down 2.5bps at -0.607%, and 30-Yr is down 2.9bps at -0.185%.
• UK: The 2-Yr yield is down 0.6bps at -0.081%, 5-Yr is down 1bps at -0.04%, 10-Yr is down 2.6bps at 0.257%, and 30-Yr is down 5.5bps at 0.799%.
• Italian BTP spread up 0.5bps at 119.7bps
• Spanish bond spread up 0.2bps at 63.6bps/Portuguese up 0.2bps at 60.1bps