EGBs-GILTS CASH CLOSE: Squaring Higher Pre-US Elections

After starting the session on the back foot, an afternoon rally left Gilts and Bunds stronger by Tuesday's close.

• Both the UK and German curves flattened, with long-end yields falling sharply in the afternoon. While there was no particular catalyst, some contacts suggested that desks were squaring positions ahead of US elections later.
• A BBG report that the UK and EU were close to a "breakthrough" on N Ireland helped boost risk appetite, with GBP jumping and Bund and Gilt futures extending session highs.
• BoE's Pill commented on potential de-anchoring of inflation expectations, though hike pricing was largely unchanged on the day.
• Periphery spreads tightened in a risk-on session, with equities rallying and the US dollar weakening - with all attention on overnight US election results.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany

• Germany: The 2-Yr yield is up 11.5bps at 2.324% (reflecting new Schatz becoming benchmark), 5-Yr is down 3.7bps at 2.199%, 10-Yr is down 6.2bps at 2.281%, and 30-Yr is down 8.2bps at 2.185%.
• UK: The 2-Yr yield is up 2.4bps at 3.254%, 5-Yr is down 3.6bps at 3.504%, 10-Yr is down 8.6bps at 3.552%, and 30-Yr is down 11.5bps at 3.738%.
• Italian BTP spread down 3.4bps at 211.2bps / Spanish down 1bps at 103.4bps