EGB markets have demonstrated some......>

EGB SUMMARY: EGB markets have demonstrated some fairly random movements today:

the Bund contract shot up from the getgo to 163.05, falling to 162.76 and then

rallying again to just above 163.00.

- Early on, the biggest flows were in the Schatz contract and we have noted some

good and consistent paying flows in the 2Y and 5Y tenors of the EUR swap curve.

- Economic data has been limited to the Italian November economic sentiment

index, which came in weak at 108.8 from 109.1.

- Italian paper has been well bid and the Bund-BTP spread is 2.4bp tighter at

142.7bp. Portuguese paper is also tightening but Spanish debt is lagging a

little. With the Catalan election on Dec 21, there is an understandable

reticence while fresh polls point to a Parliament with no overall control. Irish

debt is stable despite a strong possibility of government collapse.

- The German 2Y yield is unchanged at -0.697% on Monday, the 10Y yield is down

0.7bp at 0.354%. Volumes are not impressive. 

- Last week saw short-dated German paper underperform swaps quite considerably

but this weakness is not evident today.