Core EGBs have dropped sharply on.......>

EGB SUMMARY: Core EGBs have dropped sharply on positive inflation and growth

data, while periphery spreads are grinding tighter Tuesday.

- Bunds appear to have bottomed out a little after 1000BST, though regional CPI

had done its damage. Our tracking estimate for the national number is now 0.90%

M/M, which equates to 1.98% Y/Y (not HICP, but strong correlation).

- Q1 GDP in EZ, IT, ES came in a bit stronger than expected, as did German

labour market data.

- Spread of 10-Yr Italian BTPs vs Bunds resuming its downtrend, 3.9bps tighter

at 254.3bps. Spain down 2.9bps at 98bps, Portugal down 3.4bps at 108.8bps.

- Decent BTP / CCTeu auction this morning (sale at top of range, decent cover

for 5-Yr and 10-Yr nominal) may have helped risk appetite.

- Latest EGB futures prices:

* Jun Bund futures (RX) down 46 ticks at 165.09 (L: 164.96 / H: 165.69)

* Jun BTP futures (IK) up 8 ticks at 130.44 (L: 129.67 / H: 130.46)

* Jun OAT futures (OA) down 39 ticks at 161.73 (L: 161.58 / H: 162.26)