EGBs-GILTS CASH CLOSE: German Short End Gains Stand Out

The German short-end was the standout outperformer Monday, contrasting with yield rises across the rest of the curve and in the UK.

• With relatively few macro / headline triggers (weak German industrial production data may have helped Bunds strengthen on the margin), the main driver of morning price action was the Bundesbank's remuneration tweak on government deposits.
• Announced late Friday, the news that gov't deposits would receive 0% returns as of October helped fuel a scarcity-related bid for Schatz while widening swap spreads.
• The German curve twist steepened, with the UK's bear steepening, with the space giving up part of Friday's post-US jobs data rally.
• Greece ended up underperforming periphery peers, following early session outperformance after attaining investment grade status from Scope on Friday.
• Tuesday morning brings some final CPI readings, but the main highlight is the ECB Consumer Expectations Survey.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 2.7bps at 2.987%, 5-Yr is up 0.9bps at 2.59%, 10-Yr is up 3.9bps at 2.601%, and 30-Yr is up 7bps at 2.694%.
• UK: The 2-Yr yield is up 4.3bps at 4.963%, 5-Yr is up 5.6bps at 4.458%, 10-Yr is up 8.1bps at 4.461%, and 30-Yr is up 8.7bps at 4.656%.
• Italian BTP spread up 1bps at 166bps / Greek up 5.1bps at 127.7bps