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BONDS: EGBs-GILTS CASH CLOSE: Gilts Underperform Ahead Of Heavy UK Calendar

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Gilts underperformed Bunds Monday at the start of a busy week on the UK calendar.

  • December flash PMIs were the session's focus, and both the Eurozone and UK readings proved mixed (manufacturing weaker, services rebounding), though there was only limited lasting hawkish reaction to evidence of inflation pressures.
  • Global core FI weakened in the afternoon on strong US Services PMI data and a modest rebound in oil prices, with Gilts hardest-hit. Chancellor Scholz's government lost its vote of confidence as expected, setting up early German elections on 23 Feb.
  • ECB's Schnabel echoed the broader Governing Council's view that further easing toward neutral is appropriate, though again she did not sound supportive of easing past neutral. Earlier, ECB's Wunsch had similar sentiments.
  • The UK curve bear flattened on the day, with Germany's twist steepening.
  • Periphery EGB spreads widened, and while French spreads did too the move was contained given the sovereign's downgrade late Friday.
  • The week's Europe highlight is the Bank of England decision released Thursday - as our preview of this week's CPI and Labour Market data (PDF) noted, unless there are absolutely huge surprises in thew data, it looks very likely that Bank Rate will be left on hold. Tuesday sees the Labour Market data, as well as German IFO/ZEW.

Closing Yields / 10-Yr EGB Spreads To Germany

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Gilts underperformed Bunds Monday at the start of a busy week on the UK calendar.

  • December flash PMIs were the session's focus, and both the Eurozone and UK readings proved mixed (manufacturing weaker, services rebounding), though there was only limited lasting hawkish reaction to evidence of inflation pressures.
  • Global core FI weakened in the afternoon on strong US Services PMI data and a modest rebound in oil prices, with Gilts hardest-hit. Chancellor Scholz's government lost its vote of confidence as expected, setting up early German elections on 23 Feb.
  • ECB's Schnabel echoed the broader Governing Council's view that further easing toward neutral is appropriate, though again she did not sound supportive of easing past neutral. Earlier, ECB's Wunsch had similar sentiments.
  • The UK curve bear flattened on the day, with Germany's twist steepening.
  • Periphery EGB spreads widened, and while French spreads did too the move was contained given the sovereign's downgrade late Friday.
  • The week's Europe highlight is the Bank of England decision released Thursday - as our preview of this week's CPI and Labour Market data (PDF) noted, unless there are absolutely huge surprises in thew data, it looks very likely that Bank Rate will be left on hold. Tuesday sees the Labour Market data, as well as German IFO/ZEW.

Closing Yields / 10-Yr EGB Spreads To Germany

Keep reading...Show less