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it has been a busy day in fixed income markets with 2-year Treasury yields and 10-year gilt yields hitting their highest levels since March 2020. The moves have come amid a positive outlook for risky assets with European and US equity index futures higher.

  • The German election was held at the weekend and our political analysis team note that with the R2G coalition having failed to win a majority, the remaining possibilities for coalitions sit around the political mainstream, with little impact of a major change in policy stance towards Germany's fiscal outlook, stance on the eurozone, or foreign policy from any of these coalition combinations.
  • The biggest event later today will be a speech from Bank of England Governor Andrew Bailey. It will be watched closely to see whether his comments push back on or endorse market pricing. Last week's MPC Minutes had a statement indicating that some members could be ready to vote for a hike in Bank Rate ahead of the end of the APF scheme (which is scheduled to end mid-December). The market continues to discuss whether this was a hawkish jolt from the MPC or was intended to merely reinforce the sequencing review and note that the MPC would not end QE early.
  • Also later today we have the preliminary print of US durable goods orders and are due to hear from the ECB's Lagarde and de Cos as well as the Fed's Evans, Williams and Brainard.
  • TY1 futures are down -0-6 today at 131-26+ with 10y UST yields up 3.0bp at 1.483% and 2y yields up 1.4bp at 0.285%.
  • Bund futures are down -0.30 today at 170.00 with 10y Bund yields up 1.7bp at -0.212% and Schatz yields up 0.3bp at -0.700%.
  • Gilt futures are down -0.32 today at 125.84 with 10y yields up 4.0bp at 0.964% and 2y yields up 2.5bp at 0.402%.