EGBs rallied early in the session but...>

EGB SUMMARY: EGBs rallied early in the session but the bargain hunted ended

within a couple of hours and Bunds traded sideways.

- The Italian 3Y, 7Y and 15Y auctions were postponed twice for technical

reasons. Given the complicated set up, the cover ratios were not terrible but

clearly little was pre-hedged and there was re-distribution trades reversed a

lot of the previous hours' spread tightening to Germany.

- What didn't help the aftermath of the Italian auction was a sudden dip in the

Bund contract from 162.45 to 162.25 as 12.5k total of Bund block trades were

sold at the same time as the auction results were released.

- As the US session progressed, Treasuries were hit by more selling and this

spilled over to the Bund such that the 2bp decline in yield seen in the first

hour of trading was completely surrendered. Going into the close the German

curve was 0.2bp higher across the 2-10Y section of the curve, with the 30Y

showing a tiny yield decline. Peripheral spreads to Germany were tighter: Italy

-2.4bp, Spain -5.2bp, Portugal & Greece -8bp. 

- BTP Italia order total reaches a robust E2.03bln for the day.