Bonds: Gilts unwanted in 'risk-on' session

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

US: 2.78% (+3bp)

UK: 1.35% (+2bp)

Germany: 0.26% (+2bp)

France: 0.66% (+2bp)

Spain: 1.35% (-2bp)

Italy: 2.73% (-4bp)

Portugal: 1.73% (-3bp)

Greece: 4.18% (-4bp)

Japan: 0.02% (+1bp)

Gilts were unwanted going into the weekend, even as Sterling gave back some of its recent gains, with analysts still somewhat divided on whether the risk of a 'hard Brexit' had in fact decreased given events over the past week or not.

For those at Barclays Research, they had not.

"Brexit developments have not made the final outcome any clearer, other than sending a strong signal that most MPs are against a crash-out scenario," they told clients.

Nonetheless, Barclays believed a hard Brexit was increasingly unlikely, precisely due to the strong opposition in Parliament.

On 21 January, the Prime Minister was due to lay-out her alternate plan for Brexit, following MP's rejection of her Plan A during the preceding week, even as she comes under pressure from all sides, with some observers calling for her to show more flexibility on her red lines in order to help see off the risk of a no-deal outcome.

With an extension of Article 50 increasingly likely, how much ground each side concedes over the coming week may help clarify for just how long such an extension may run, Barclays Research said.

David Madden at CMC Markets UK on the other hand appeared to be in a more dour mood, telling clients: "The UK is set to leave the EU in late March, and we are still none-the-wiser about the next move. Theresa May will reveal a new deal on Monday, but given her crushing defeat in the commons earlier this week, dealers aren’t holding out much hope."

Acting as a backdrop, and further weighing on Gilts, Friday was clearly a 'risk-on' session, as reflected in declines for Gilts, US Treasuries, Bunds and French OATs.

On the euro area periphery meanwhile it was exactly the opposite story.

Stoking risk appetite was a report in the Journal - denied by a spokesman from the US Treasury - that officials in Washington might be studying lifting at least some of the existing tariffs on China in order to incentivise longer-term concessions by Beijing.

The impact of that report was amplified by news, from Bloomberg this time, that China had offered to Washington to reduce its trade surplus with the US over the next six years.

America had reportedly asked that the timeline for that to happen be shortened to two years.

To take note of, economic data released in the States on Friday was decidedly mixed, with the preliminary reading on the University of Michigan's consumer confidence index printing at 90.7 for January, versus an end of December level of 98.3 (consensus: 96.4).

On a more upbeat note, according to the Federal Reserve, US industrial output rose in December by 0.3% versus November, helped by big jumps in factory and mining production.

Meanwhile, in the UK, ONS reported that retail sales volumes shrank at a pace of 0.9% month-on-month, although that was only a tad worse than the consensus projection calling for a drop of 0.8%.

Lastly, in remarks to the New Jersey Bankers Association, San Francisco Fed chief, John Williams, reportedly argued that the approach that was now required was one of "prudence, patience, and good judgement."

"If growth continues to come in well above sustainable levels, somewhat higher interest rates may well be called for at some point," he reportedly said.

"However, if conditions turn out to be less robust, then I will adjust my policy views accordingly."