Bonds: Gilts underperform amid reports around Brexit backstop deal

These were the movements among some of the most widely-followed 10-year sovereign bonds:

US: 3.11% (+1bp)

UK: 1.56% (+6bp)

Germany: 0.64% (+3bp)

France: 0.87% (+3bp)

Spain: 1.41% (-0bp)

Italy: 2.12% (-0bp)

Portugal: 1.80% (-0bp)

Greece: 4.44% (+7bp)

Japan: 0.06% (+1bp)

Gilts on both ends of the interest rate curve underperformed on Thursday, particularly on the longer-end.

According to some market observers, the trigger for the move was a report early on Thursday that Westminster would tell Brussels that, as a backstop should negotiations not be finished in time, the UK was willing to remain inside the European Union's customs union after the end of the agreed post-Brexit transition period.

Later in the day, speaking from the sidelines of the EU summit taking place in Sofia, Bulgaria, the Prime Minister said the UK would leave the customs union upon Brexit.

However, according to Reuters, which cited a source familiar with the discussions, the government was indeed thrashing out a backstop arrangement of its own that would be acceptable to the UK - but not an extension of the transition deal.

On the shorter end of the curve, the yield on the benchmark two-year Gilt was four basis points higher at 0.86%, with the 52-week highs now looming ten basis points above.

At the 10-year tenor meanwhile, Gilts broke past their April highs, possibly paving the way for a move towards the year-to-date highs at 1.65%.