The 10Y gilt yield is down 8bp and......>

EGB SUMMARY: The 10Y gilt yield is down 8bp and while the UK suffers from

idiosyncratic risks, such a move could not be ignored in the EGB space.

- While the long dated yields were lower in Europe and the 30Y led the way,

German and French yields below the 3Y sector were actually higher as investors

set about preparations for the ECB meeting on Thursday. With the 2Y Schatz on

the low side of its recent range at 0.735%, there is little hope of further

yield downside if the ECB Staff forecasts are being extended to 2020. Note that

there is also a Schatz 2Y auction tomorrow.

- There was ample activity in EUR swaps on Monday and the 30Y swap outperformed

cash and other sectors of the curve.

- Spanish and Italian debt markets were heavy but have also performed extremely

well over the past months, so the 2bp widening in Spanish and Italian markets on

Monday was insignificant. Worth noting was that the Italian govt suspended plans

to sell stakes in Eni and Enav to CDP.

- Going into the close, the German 2-10Y spread was heading toward the important

100bp level, which was rejected at the start of December (currently 102bp).