MNI European Closing FI Analysis: Periphery EGBs Finally Falter

EGB SUMMARY: Risk-off sees BTP-Bund spreads almost 10bp wider on the day

• Bunds remain the outperformers in core fixed income space, with 10-year yields falling more than gilts or Treasuries.
• Peripheral spreads remain noticeably higher on the day, with BTP futures moving around a point lower than yesterday's highs at writing. Coupled with the Bund rally this has seen BTP-Bund 10-year spreads widen by just under 10bp today. Other peripheral spreads have seen similar moves, but again are a little off their widest levels at writing.
• There has been no obvious trigger for the slight recovery in sentiment with concerns over US non-existent US fiscal stimulus and increased Covid-19 restrictions/cases across Europe having driven the rally earlier in the day.
• Bund futures are up 0.63 today at 175.98 with 10y Bund yields down -3.7bp at -0.619% and Schatz yields down -2.2bp at -0.772%.
• BTP futures are down -0.80 today at 149.42 with 10y yields up 5.9bp at 0.715% and 2y yields up 5.4bp at -0.302%.
• OAT futures are up 0.45 today at 169.98 with 10y yields down -2.8bp at -0.340% and 2y yields down -1.6bp at -0.712%.

GILT SUMMARY: Lockdown Momentum Driving Gilt Gains

Gilts have been well bid today with cash yields 2-5bp lower and the curve bull flattening.

• Following a tightening of social restrictions in Northern England, London will now face similar measures from this Friday. Concerns about the impact of regional lockdowns on the fragile economy have underpinned the bull flattening of sterling and euro curves.
• Last gilt yields: 2-year -0.0645%, 5-year -0.0835%, 10-year 0.1695%, 30-year 0.7121%.
• The Dec-20 gilt future trades at 136.70, 19 ticks off the high.
• The DMO earlier sold GBP1.75bn of 1-/3-/6-month bills.
• Irish Foreign Minister Simon Coveney today indicated that that there has been some progress on the level playing field provisions of the Brexit trade deal and that he expects a deal to be agreed by the start of November.