Core/Semi-core EGBS saw decent 2-way....>

EGB SUMMARY: Core/Semi-core EGBS saw decent 2-way flow in European afternoon

session as markets looked ahead to possible risks over the weekend including

shutdown of US government and stall in German Grand Coalition talks, and look

set to close mixed, curve steeper with short-end rallying. German 10-yr yield is

-0.3bp lower at 0.569% with 2s/30s 3.4bp steeper.

- There was some attention on MNI ECB source story that said forward guidance

will mostly likely change in March, with decision on future of APP in June.

Speculation that QE could be 'tapered' to Dec 2018 and there be 2-quarters

before rates start to rise supported bid in Euribor and short-end EGBs.

- Overall, the long end of the curve was weighed despite twitter headlines that

Republicans are preparing for government shutdown for a few days.

- EMU periphery were bid throughout the day and only saw some light selling

towards the end of the session. 10-yr Bund/Bonos spread is 4.3bp tighter at

87.7bps, with markets eyeing possible Spain rating upgrade from Fitch tonight.

- German SPD party congress vote on entering formal Grand Coalition talks by

delegates on Sunday is also eyed.