Focus on the Bank of England

It's been a day of divergence with Bunds outperforming, gilts a little higher and Treasury futures close to flat on the day. There doesn't seem to be too much behind the moves at present.

• The main highlight for fixed income markets today will be the Bank of England MPC policy decision and Summary. We expect little in terms of new policies with the real focus on aspects of QE. There is an almost unanimous expectation in the market that the Bank will leave the pace of purchases unchanged when it resumes after the Christmas break, but there are question marks over how strongly the Bank will telegraph that the pace could increase in the event of a no deal Brexit. The Bank also confirmed at its last meeting that it was looking at the technicalities of QE and we expect the short bucket to be modified from 3-7 years by reducing the minimum maturity of gilts eligibly for purchase by the Bank.
• Elsewhere, Brexit talks continue while French President Macron has tested positive for Covid-19. Earlier this week he met both the Spanish and Portuguese prime ministers face to face.
• In terms of data today we have US jobless claims data and housing data as well as speeches from the ECB's Schnabel and de Guindos.
• TY1 futures are down -0-0+ today at 137-28 with 10y UST yields up 0.6bp at 0.924% and 2y yields down -0.2bp at 0.116%.
• Bund futures are up 0.20 today at 177.75 with 10y Bund yields down -1.3bp at -0.581% and Schatz yields down -0.3bp at -0.737%.
• Gilt futures are up 0.10 today at 134.63 with 10y yields down -0.1bp at 0.270% and 2y yields down -0.1bp at -0.85%.