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CREDIT UPDATE

iTraxx closed -0.6/-4 tighter, cash €IG looks skewed tighter again pointing to its 6th straight session of tighter moves. Total return investors will share in today's moves - belly rates -7bps & swap spreads relatively flat. $IG index prints are also pointing to a move tighter, US rates -3bps - Bund/UST 5yr X still 8bps shy of Dec levels. Rally in rates today was driven by the front end, bull steepening along both curves; 7bps & 10bps of easing added for Fed/ECB this yr while Z4/Dec 3-month futures were -6 & -12 for the two. Rates pricing just shy of 90% chance ECB delivers first cut in April, March Fed still at a coin-toss. Equities did find support from the local rates this afternoon €IG equivalents are flat now, strong gains from Nokia & IBM on positive earnings/FY outlooks.

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