UK gilts underperformed European and US peers on Tuesday as December PMI data pointed to brighter economic prospects in Britain.

After paring intraday losses, UK bonds closed lower, with yields rising 1-2 basis points across the curve. Traders shifted focus to Wednesday’s UK inflation report.

German bund yields fell 1 basis point, tracking US Treasuries after the US unemployment rate climbed to a four-year high.

Market Snapshot: - German 10-year yield steady at 2.85% - German bund futures down 3 ticks to 127.55 - Italian 10-year yield up 2 bps to 3.55% - Italy-Germany spread widens 2 bps to 70 bps - French 10-year yield down 2 bps to 3.55% - UK 10-year yield rises 2 bps to 4.52%