Bonds: Gilts gain on haven flows, political risk rises

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

US:2.41% (-5bp)

UK:1.32% (-4bp)
Germany:0.37% (-4bp)
Spain: 1.79% (+10bp)
France: 1.14% (+6bp)
Italy: 2.38% (+11bp)
Portugal: 4.24% (+7bp)
Greece: 7.66% (+14bp)
Japan: 0.11% (+1bp)

Gilts outperformed on Monday as euro area political risk picked up over the weekend after French far-right presidential hopeful laid out plans for an EU referendum at a rally on Sunday.

Le Pen told 5,000 of her supporters in Lyons she would pursue a referendum on the country's continued membership of the EU, an exit from the euro, 'smart' protectionist measures and a cap on immigration, among other initiatives.

That saw the interest rate differential between 10-year French and German sovereign debt widen to the most since at least early 2013.

The weekend did not see any significant negative newsflow out of Capitol Hill, although some reports suggested there were efforts under way in the new Administration to avoid any further 'disruptions' as occured with the haphazard roll-out of President Trump's immigration curbs (an outright ban for many commentators).

Nonetheless, analysts appeared to have taken note of the potential for increased political risk in the US as well.

In a research note released by JP Morgan on Friday, the investment bank pointed to the greenback's worst January in 30 years as a sign that the Trump rally was over.

"Dollar confidence and positioning is being eroded by erratic policy emissions from the White House," the report said.