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EGBs-GILTS CASH CLOSE: Flattening Reverses As U.K. Looks Isolated


The start of the week was dominated by COVID, both on fears of a mutant strain leading to severe lockdowns and travel bans for the U.K., and on the hope of a vaccine.

  • COVID fears, plus hard Brexit looming, sparked strong bull flattening in the morning. Periphery spreads widened. But the moves largely reversed, starting w news the EMA had approved the use of the Pfizer-Biontech vaccine.
  • Re the mutant strain, afternoon reports that E.U. would consequently impose a bloc-wide travel ban w the U.K. until midnight Tuesday, though easing the blow, similar reports said freight traffic would still be able to come to the U.K.
  • As we came to the cash close, U.K. P.M. Johnson was due to speak, having convened the Cobra committee in the afternoon on the situation.

Closing Levels / 10-Yr Periphery EGB Spreads:

  • Germany: The 2-Yr yield is down 1.1bps at -0.736%, 5-Yr is down 0.9bps at -0.753%, 10-Yr is down 0.9bps at -0.58%, and 30-Yr is down 1.6bps at -0.176%.
  • UK: The 2-Yr yield is down 2.3bps at -0.107%, 5-Yr is down 3.8bps at -0.08%, 10-Yr is down 4.4bps at 0.205%, and 30-Yr is down 5.2bps at 0.754%.
  • Italian BTP spread up 1.3bps at 114.9bps / Spanish spread up 2bps at 63.6bps

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