EGB markets came alive soon after the...>

EGB SUMMARY: EGB markets came alive soon after the Italian final manufacturing

PMI came in weaker than expected. There was a sudden flurry of Schatz buying and

the impact spread along the curve. Sources said that dealers had been lifted out

of positions in the month-end extension yesterday afternoon and so the market

was easily pushed higher. There were also 3 auction sets that were in the

process of being set up for and the rally undoubtedly helped remove many

duration hedges.

- With such a poor auction set-up it was no surprise to find that they were

weak. This was particularly true of the French auction. However, bad weather in

London may well have thinned out some of the dealers.

- Despite the weak Italian PMI data, the flash reading for the Eurozone

manufacturing PMI was revised a tick higher to 58.6. Eurozone unemployment data

matched consensus at 8.6% in January.

- As US trading got underway and the US Mfg ISM printed at its highest since

2004, the UST and EGB market began a modest decline and approaching the close

the 10Y Bund yield was 1.8bp lower at 0.639%.