Bonds: Government debt markets extend gains at the start of 2019

These were the movements in some of the most widely-followed 10-year sovereign bond yields:

US: 2.62% (-6bp)

UK: 1.21% (-7bp)

Germany: 0.17% (-7bp)

France: 0.65% (-6bp)

Spain: 1.40% (-2bp)

Italy: 2.69% (-5bp)

Portugal: 1.71% (-2bp)

Greece: 4.39% (-1bp)

Japan: 0.0% (Bank holiday)

Longer-dated Gilts outperformed at the start of the new year, as a wave of risk aversion swept over markets on Wednesday in the wake of a weaker-than-expected reading on China's manufacturing sector.

Investor sentiment was undermined overnight after China's Caixin/IHS Markit manufacturing sector Purchasing Managers' Index printed at 49.7 in December, which was down from November's reading of 50.2. It marked the first contraction in 19 months and fell short of economists' expectations for a reading of 50.1.

"This is not a good indicator as we eye tariffs biting even harder in 2019 than they did last year," said Neil Wilson, chief market analyst at Markets.com.

A sharp drop in the pound's value also put a bid into Gilts.

Stateside meanwhile, all eyes were on the move lower in government debt yields on both the short and long ends of the curve over the holidays.

On that note, Joachim Fels, managing director at PIMCO, told the Financial Times that US growth momentum would be impacted by the recent jump in credit spreads and flatter Treasury yield curve, as well as by the drop in crude oil prices, as America was now nearly as much a consumer as a producer.

Fels said the Federal Reserve looked likely to end or pause its tightening campaign "sooner rather than later this year", pointing out how money market forwards were currently pricing just such a scenario now at the then current level of the Fed funds rate.

On a more positive note, he believed a US-China trade deal, a reversal in the Greenback and a "clear" signal from the Fed that the end to its tightening cycle was in sight would be "good news" for risk markets and President Donald Trump.