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EGB SUMMARY: Core European debt markets have lacked support as the bears are in
control ahead of the Yellen and Draghi speeches later today.
- News flow has been limited. The German IFO index printed slightly better than
expected overall, with a small miss on the current assessment but a
better-then-expected improvement in the expectations index.
- The weakness is being led by the 30Y area of the core curves but the 'trade of
the day' was a 14k sale of Bobl contracts just after 11am London time. This was
equivalent to E1.7bln of the 5Y German benchmark.
- The trade sent everything downwards quickly and pulled the Bund around 10
cents lower to hit a low of the day at 164.41.
- Once again, the Spanish market is underperforming Germany but the Italian
market is outperforming, although the size of yield movements is fairly small.
- German debt is underperforming OIS swaps by around 0.5bp at the 10Y area
today. Such a trade would gel with a scaling back of ECB QE.
- Currently, the 10Y German yield is 2.7bp higher at 0.402%, with a 0.5bp
steepening in the 2-10Y spread.