EGBs-GILTS CASH CLOSE: Massive Rally On New Covid Variant

Friday's session was dominated by fears over a new Covid variant which prompted one of the biggest risk-off moves since the beginning of the pandemic, reminiscent of March 2020.

• The EU and UK (among others) banned flights to southern Africa, with the EU disease control agency naming B.1.1.529 a "variant of concern", and the WHO expected to do likewise. European stocks saw their biggest selloff of the year, with oil prices falling 10+%.
• UK and German yields fell sharply, with Gilts outperforming.
• While it was a bull flattening move, markets continued to price out BoE (and to a lesser extent, ECB) rate hike prospects at the short end.
• Periphery EGBs largely held their ground, with spreads widening only slightly.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is down 1.8bps at -0.756%, 5-Yr is down 6.9bps at -0.64%, 10-Yr is down 8.4bps at -0.335%, and 30-Yr is down 7.3bps at 0.02%.
• UK: The 2-Yr yield is down 10.1bps at 0.472%, 5-Yr is down 12bps at 0.617%, 10-Yr is down 14.4bps at 0.825%, and 30-Yr is down 12.5bps at 0.927%.
• Italian BTP spread up 0.3bps at 130.9bps / Greek up 3.5bps at 163.7bps