EGBs had a positive handover from.......>

EGB SUMMARY: EGBs had a positive handover from overnight price action but the

upward move failed to stick. 

- Lots of headlines came from the ECB-watchers conference in Frankfurt. EGB

weakness in early Europe as ECB watchers conference delivered a subtle hawkish

message delivered in a more academic way by Draghi, principally saying that the

Philipps curve is making a comeback.

- The weakness continued all morning and heading into the German and Portuguese

auction the move downward accelerated, led by the Bund 2048 that was being

auctioned. Results showed a particularly poor auction and a re-distribution

trade developed as nearly every auction bid was filled. Portuguese 10 and 30Y

auctions were fairly average although the 30Y bid was a little light. 

- Slightly weaker than expected US retail sales prompted a super-sized reaction

from EGBs. However, comments by Lega's leader, Savini that he is open to a

coalition with 5-Star sent the Bund-BTP spread rapidly 3bp higher although it

very rapidly reversed direction twice in confusion. Bunds caught a late bid. The

2Y Schatz is unch at -0.578%, the 10Y Bund is -3.0bp at 0.59%.