A sense of relative calm has wafted.....>

EGB SUMMARY: A sense of relative calm has wafted over financial markets as the

S&P500 bounced 1.7% and the VIX closed a shade below 30 last night. Not

surprisingly, EGB yields are slightly higher led by the 10Y sector of Germany,

which is currently registering a 1.3bp yield rise to 0.707%. 

- In a few hours, Germany will sell its 10Y benchmark and the market will be

rightly nervous because the past three 10Y sales have been technically

uncovered. Recent market volatility may shorten the horizon over which dealers

will set up for the auction.

- It is also possible that Greece could launch its 7Y note today, a deal that

was postponed because of market volatility. EFSF is also issuing a Feb-28 via

syndication in the "near future" and may also come today. 

- Despite extended talks into Wednesday morning, there has been no GroKo

agreement between SPD and CDU/CSU yet. Talks are expected to resume later.

- Italian debt is performing most strongly in Europe today, with the 10Y

Bund-BTP spread declining 1.5bp to 128bp, not far away from its multi year lows

of 124bp.