EGBs/Gilts: Weak PMIs Fuel Risk Off Shift

Markets have pivoted to a more characteristic risk-off position this morning with core European sovereign curves bull flattening, periphery EGB selling off, equities pushing lower and G10 FX vs the USD broadly weaker.

• Gilts have firmed with cash yields 1-2bp lower on the day and the curve marginally flatter.
• Bund yields have similarly edged down ~1bp.
• The OAT curve has flattened slightly, mainly on the back of the longer end firming.
• BTPs have sold off sharply with yields up 3-4bp and the curve 1bp steeper on the day.
• The Eurozone manufacturing and services flash PMI prints were a touch better than expected, while still weaker than the previous month and reflecting the impact of tighter mobility restrictions. The UK flash services PMI missed by a relatively wide margin (38.8 vs 45.0 survey).
• The UK DMO earlier sold GBP5.0bn of 1-/3-/6-month T-bills.
• Focus will shift to this afternoon's US preliminary PMI prints for January.