EGB/GILT: The periphery-core spread....>

BOND SUMMARY: EGB/GILT: The periphery-core spread compression follow the joint

Merkel-Macron presser on Monday has unwound slightly this morning. Austria and

some of its fiscal allies are expected to announce a counter proposal to the

E500bn recovery fund put forward by France and Germany.

- German bunds have firmed since the morning with yields across much of the

curve now close to unch on the day.

- The OAT curve bull flattened with the 2s10s and 2s30s spreads 2bp narrower.

- BTPs have trade weaker with cash yields up 1-2bp.

- Supply this morning came from the UK (gilts, GBP3.75bn), Germany (bunds,

E3.4bn), France(M/T OATs, E10.0bn & linkers, E1.25bn) and Portugal (bills,

E1.75bn). French linkers, in particular, were well covered.

- The ECB announced that it allotted E851mn through its new PELTRO operation.

- UK headline CPI for April came in slightly below expectations this morning,

but the significance has arguably been dwarfed by yesterday's jobless claims

data. Gilts have slightly outperformed, particularly at the longer end with

30/40/50-year yields down 3-4bp