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EGBs-GILTS: Gaining On Broader Risk-Off Move

BOND SUMMARY

Gilts and Bunds have gained to start the week, in a risk-off move with equities falling and the US dollar strengthening.

  • Curves bull flattening, with periphery spreads a little wider.
  • If anything, the move into safe haven bonds (German and UK yields down 2bp or less across the vast majority of the curves) is modest compared with the drop in equities (-1.5% or more for several European bourses).
  • Most focus is on the rise in COVID cases and the related uncertainty in the path forward for normalisation - in focus in the UK in particular on restrictions easing amid today's "Freedom Day" .
  • A fairly vacant docket today, with no bond supply or tier 1 data. BOE's Haskel speaks at 1100BST.

Latest levels:

  • Sep Bund futures (RX) up 37 ticks at 175.24 (L: 175.02 / H: 175.4)
  • Sep Gilt futures (G) up 19 ticks at 129.31 (L: 129.21 / H: 129.36)
  • Sep BTP futures (IK) up 6 ticks at 153.23 (L: 152.98 / H: 153.35)
  • Italy / German 10-Yr spread 0.4bps wider at 106.4bps

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