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BLOCK, Red Dec Put Spd


1/3/6-month UKTBs (repost)


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There has been a flattening bias in core fixed income today with the German curve outflattening the UK curve, possibly as Covid-19 concerns weigh more on the Eurozone than the UK.

  • The move in German 10-year has happened as we have rejected the -0.35% level in yields with a break lower for yields stalling at -0.3059%, the lowest since mid-September. We moved as high as -0.2019% yesterday but failed to convincingly break back above the 50-dma which today comes in at -0.2035%. Schatz have barely moved, leaving the 2s10s curve 1.6bp flatter on the day.
  • The flattening in the UK curve has been much more modest. 2-year gilt yields are flat on the day and 10-year yields down 0.5bp, leading to a flattening of 0.5bp in the 2s10s.
  • Against this backdrop, we have seen Euribor and short sterling strips move in lockstep, with limited moves in Whites and Reds while Greens and Blues are around 1.0-1.5 ticks higher for both.
  • Corrects previous bullet which incorrectly referred to the Eurodollar rather than Euribor strip.