EGBs-GILTS CASH CLOSE: Modest Political Risk Relief

Yields rose across European curves Monday, with EGB periphery spreads narrowing.

• With weekend developments on the French political front helping soothe market concerns to some degree (e.g. Le Pen saying if victorious in the upcoming election she would work with Pres Macron), some of last week's jump in related risk premia softened.
• This saw Bunds underperform among EGBs with some bear steepening in the German curve. France/Germany 10Y spreads tightened 2.8bp from last week's 7-year wides.
• Weakness extended in the European afternoon amid heavy US corporate issuance.
• Friday's periphery underperformers, BTPs and GGBs, were Monday's outperformers.
• Gilts were weighed down by a poor BoE APF sale of longer-dated instruments. BoE implied cuts were relatively unchanged on the day, with attention on UK CPI Wednesday and the MPC decision Thursday.
• On the Eurozone docket Tuesday, we get German ZEW and final Euro CPI, along with multiple ECB speakers (starting with Knot and Vujcic in the morning).

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 5.1bps at 2.814%, 5-Yr is up 5.1bps at 2.424%, 10-Yr is up 5.4bps at 2.414%, and 30-Yr is up 5.9bps at 2.571%.
• UK: The 2-Yr yield is up 4.2bps at 4.213%, 5-Yr is up 4.9bps at 3.994%, 10-Yr is up 5.9bps at 4.115%, and 30-Yr is up 6.1bps at 4.6%.
• Italian BTP spread down 4.1bps at 152.9bps / Greek down 4.3bps at 124.8bps