A sharp rally in the Bunds in the.......>

EGB SUMMARY: A sharp rally in the Bunds in the morning was a key talking point

as markets pushed higher on cash market-led action in the morning and then by

the release of US CPI data in the European afternoon. The 10Y Bund yield is

3.5bp lower and the 2-10Y section of the German yield curve is flatter.

- Some also pointed to a E16bln Obl redemption on Friday and generally negative

net supply situation into the end of the month.

- In Spain, the Catalan leader Carles Puigdemont is under pressure as the

hardliners in the region push him to declare independence while the Spanish

central government is urging him to do the opposite. The Bund-Bonos spread is

less than 1bp tighter heading into the close and is trading at 118.4bp.

- Over the weekend, Austrian elections are expected to return the conservative

OVP party as the largest party. However, worries remain at the possibility of

the right-wing populist party FPO gaining enough support to be part of a ruling

government.

- The Italian curve has flattened considerably today with the Bund-BTP spread

3.0bp tighter and trading at 164.1bp.