EGBs initially responded to the.........>

EGB SUMMARY: EGBs initially responded to the strength in US equities, which led

to a small dip for the Bund contract at the open of trade.

- Peripheral debt has seen a form bid throughout the session particularly in the

carry/roll-centric 3-5Y sections of curves.

- Spanish CPI/HICP data surprised to the downside at 0800BST and provided a bid

to the Schatz that quickly spread up the curve. There was good downside buying

in bund option markets but was unable to stop a rally that ultimately pushed the

contract above resistance at 159.00-01 and peaked at 159.09.

- A new 30 year high in the Bund-Tsy spread of 232.5bp was seen before EGBs

began to soften.

- Economic data included fairly weak M3 data (including components) and a larger

than expected dip in Eurozone economic confidence from 114.2 to 112.6 in March.

- There was only 6m bill supply from Italy, no bond issuance.

- Most attention has focussed on equities and the Dax is currently +2.0% and

eurostoxx +1.7%.