Bonds: Gilts gain as MPC's Weale tempers speculation of further stimulus

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

US: 1.58% (+3bp)

UK: 0.824% (-1bp)
Germany: -0.016% (-2bp)
France: 0.214% (-2bp)
Italy: 1.25% (-0bp)
Spain: 1.24% (+1bp)
Portugal: 3.13% (+0bp)
Greece: 7.1985 (+8bp)
Japan: -0.25% (+0bp)

Gilts outperformed after a top Bank of England rate-setter tempered speculation of significant monetary policy easing when the Monetary Policy Committee next met in August and in the wake of the past weekend's failed military coup in Turkey.

Speaking at the Resolution Foundation, the BoE's Martin Weale said he had not yet made up his mind over how he would vote at the August MPC meeting.

"For there to be a case for easing policy I will need to expect weakness in output to be large enough more than to compensate for any overshoot in inflation on the assumption that policy is unchanged in the near term," Weale said.

"In contrast to the experience of 2008, I do not have any sense that either consumers or businesses are panic-struck and, as I observed, there have been no material signs of financial panic," Weale added.

Acting as a backdrop, over the weekend a faction of Turkey's military executed a coup attempt which failed, with about 3,000 rebel soldiers having been arrested in its wake.

However, the detention of approximately the same number of police and members of the judiciary that followed stoked worries the country's president might be using the coup as a pretext to tighten his hold on power, potentially inflicting lasting damage on the country's institutional framework.

On the corporate side of things, the 15bn US dollar portion of Teva Pharmaceuticals $20bn bond issue was meeting strong investor demand, people familiar with the matter told Bloomberg.

It successful it would be third biggest corporate bond offering thus far in 2016.

Strong demand had reportedly allowed Teva to bring down the yield on the 30-year tranche of the issue from about 2.2% to closer to 1.85%.

JP Morgan was also in the market on Monday, pricing a €2bn at 65 basis points above mid-swap.

US Treasuries gave back some of the gains made towards the end of the previous session, when news of the coup in Turkey broke.

In Spanish news, local media reports indicated that Brussels had asked the government in Madrid for more structural reform measures in exchange if it wanted to avoid a fine for having breached the government deficit reduction targets agreed with Brussels for 2015.

Meanwhile, in its latest monthly bulletin the Bundesbank proposed that the European Stability Mechanism become the euro area's main fiscal authority as well as changes to the terms on new government debt, with the latter meant to make it easier to restructure sovereign liabilities and extend maturities should it be necessary.