Core bonds have drifted marginally.....>

BOND SUMMARY: Core bonds have drifted marginally higher despite major equity

indices moving slightly higher.

- The story of the morning was the move in BTPs. Last night Fitch downgraded

Italy to BBB- with a stable outlook in a surprise move (the next scheduled Fitch

decision had been due July 10). This follows S&P keeping ratings at BBB (with a

negative outlook) and is ahead of Mood's decision which is scheduled for May 8.

Moody's currently rate Italy at Baa3 with a stable outlook (in line with Fitch's

new rating). Cash spreads are currently at 227bp, up 7.5bp on the day but around

3.5bp off the highs. BTP futures opened around 160 ticks lower on the day but

are now 70 ticks lower at 138.23.

- The focus is now firmly on the Fed later today. April is in many respects a

transition meeting following an unprecedented whirlwind of emergency activity

and ahead of the next Summary of Economic Projections in June / policy framework

review. The FOMC is therefore likely to use this opportunity to assess the state

of play and ensure its newly-launched facilities are set up properly.