Core EGB markets sank from the start....>

EGB SUMMARY: Core EGB markets sank from the start of 2018 trading, mainly the

result of an interview given to Caixin by one of the ECB Board hawks, Benoit

Coeure said that there was a reasonable chance that QE would not be renewed.

- The 10Y Bund yield rose quickly from 0.427% to a new 2 month high of 0.46%

before cash buying showed up. 

- The final European Markit manufacturing PMI data were in line with the flash

indicator although the text accompanying the release provided ample anecdotal

evidence of increasing price pressures.

- Around European mid-morning, a risk-off wave drove through the markets led by

a strong yen. Equities were weak and the Bund-BTP spread jumped quickly from

155bp to 162bp. A futures block trade that involved selling BTPs and buying

Bunds was identified but was not the full explanation of the 10Y core-peripheral

spread widening.

- Irish debt is weak as the market is half-expecting a 10Y syndicated deal

announcement this week. 

- The 10Y Bund is +2.5bp higher at 0.452%; 2-10Y spread is +1.5bp at 106.1bp.