/GILTS: It has been a strong start for EGBs,...>

EGBS: /GILTS: It has been a strong start for EGBs, underpinned by expectations

of monetary easing and mounting geopolitical risks, and in some cases fuelled by

idiosyncratic developments.

- With Rome appearing to change course in a bid to avoid the EU's excessive

deficit procedure, yesterday's BTP rally has extended into this morning. Yields

are 5-6bp lower. The 10-year BTP-Bund spread now trades at 217bp, the lowest

level since July 2018.

- A better than expected June services and composite PMI has provided a lift for

Spanish bonds. The curve has bull flattened with 2s30s ~3bp narrower.

- Bunds opened stronger, with the long-end outperforming. Current yield levels:

2-year -0.780%, 5-year -0.668%, 10-year -0.398%, 30-year 0.215%.

- In further bid to appeal to the populist vote, UK Conservative leadership

frontrunner Boris Johnson has vowed to reform 'sin taxes', particularly on

sugary products. This will appeal to the ideological party base that are likely

to crown him prime minister. Gilts trade firmer from the open with yields ~2bp

lower on the day.