Bonds: Gilts underperform ahead of auctions

These were the movements in some of the most widely-followed longer term sovereign bond yields:

US: 1.77% (+0bp)

UK: 1.43% (+2bp)

Germany: 0.13% (-0bp)

Spain: 1.46% (+2bp)

Italy: 1.24% (+2bp)

France: 0.46% (+0bp)

Japan: -0.08% (-2bp)

Portugal: 2.94% (+2bp)

Greece: 8.88% (+28bp)

Longer-dated Gilts underperformed slightly versus US Treasuries at the start of the week, amid ‘market chatter’ about Brexit and the increased risks for sterling assets perceived by traders around the 23 June referendum.

Acting as a backdrop, the results of a survey published by consultancy Deloitte on Monday revealed that hiring and investment expectations among chief financial officers had fallen to a three-year low.

The news came ahead of the two Debt Management Office auctions which were planned to take place during the week, first would come the sale of £2.75bn of five-year bonds on Tuesday, followed by an auction of another £2.5bn in 10-year Gilts two days later.

Starting from April, the DMO had asked that primary dealers increase the quantity of securities they place bids on, in what some observers said was an effort to guard against unsuccessful auctions.

Meanwhile, and in the States, speaking on Monday Boston Fed president Eric Rosengren took aim at what he considered to be an overly cautious path for interest rate hikes priced into markets.

"Risks seem to be abating that problems from abroad would be severe enough to disrupt the US recovery," Rosengren said.

"The US has weathered foreign shocks quite well […] I believe it will likely be appropriate to resume the path of gradual tightening sooner than is implied by financial-market futures [as long as the recovery continues].”

Over in the euro area, the tone of the central bankers who took to the podium was almost exactly the opposite.

In a speech delivered in Rome, European Central Bank chief economist Peter Praet talked at length about the potential risks which inflation remaining below target for too long might pose.

“This is why we have reacted so forcefully to secure our objective -- and will continue to do so in the future if necessary,” he said.

Greece was back in the news after an alleged leak over the weekend about International Monetary Fund tactics to up the ante on Greece to bring about a new bailout deal.

IMF managing director Christine Lagarde responded on Sunday, saying that her staff would not push Greece closer to default as a negotiating tactic, though the Greek Prime Minister's office said on Monday that a bailout review should be concluded immediately "without unrealistic demands for additional measures beyond those set out in the July bailout agreement".