BONDS: EGBs-GILTS CASH CLOSE: Yields Head Higher Pre-Holiday

Bund and Gilt yields continued their ascent Monday. 

• Core European FI dipped in the return from the weekend, with some pointing to commentary by ECB President Lagarde (telling the FT: "We’re getting very close to that stage when we can declare that we have sustainably brought inflation to our medium-term 2%"). OIS-implied ECB rates ticked only marginally higher, though.
• Bunds and Gilts would regain ground as oil prices faded and concerns over US-China trade tariffs simmered, but were weighed down by Treasuries toward the European cash close, with pre-Christmas US supply (2Y and 5Y today and Wednesday) eyed as a factor.
• There was little reaction to an unexpected softening in Q3 UK GDP in the final reading (0.1pp to 0.0%).
• Liquidity was thinned on account of the holidays, with Bund futures volumes at around 55% of typical recent levels.
• UK and German yields closed higher more or less in parallel, with the German short-end slightly outperforming.
• OATs underperformed, with French PM Bayrou set to unveil a new cabinet at 1730GMT/1830 local.
• There is a dearth of scheduled events Tuesday amid a limited session and ahead of Wednesday's holiday market closure.

Closing Yields / 10-Yr EGB Spreads To Germany