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Gilts remain the underperformers

BONDS
  • Treasuries and Bunds remain comfortably above Friday's lows with this morning's German IFO a bit stronger than expected, but gilts are the big movers of the day this morning with yields up 11-13bp.
  • We noted earlier that we think that these moves are driven by a combination of an FT story about the government agreeing a cap to unit energy prices for businesses through to March 2024 as well as the BOE announcing that long gilts will be sold from its APF starting from late January (the amount is not a surprise, but some had been expecting long gilts to not be sold until Q2).
  • This week we will also receive funding plans from Italy (likely today, tomorrow or potentially Wednesday), the EU (there is an investor call scheduled tomorrow) and Greece (who published on 23 December last year) and Finland (who published on 22 December last year). This morning we received the 2023 plans for the EFSF / ESM.
  • There will also be continued focus on energy markets with the EU set to discuss the price cap for natgas - although there are signs of warming weather in parts of Europe which are providing a bit of relief to markets this morning.
  • TY1 futures are down -0-8+ today at 114-17+ with 10y UST yields up 3.7bp at 3.525% and 2y yields down -0.4bp at 4.177%.
  • Bund futures are down -0.17 today at 137.26 with 10y Bund yields up 3.5bp at 2.183% and Schatz yields down -0.3bp at 2.369%.
  • Gilt futures are down -0.83 today at 102.75 with 10y yields up 11.5bp at 3.439% and 2y yields up 11.7bp at 3.565%.
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