European Government Bonds are trading...>

EGB SUMMARY: European Government Bonds are trading higher across the aboard with

yield curve flattening as the long-end outperforms as German final HICP comes in

unrevised at 1.6% y/y, while markets largely dismiss hawkish comments from ECB

Hansson yesterday. German 10-yr Bund yield is 1.2bp lower at 0.576%.

- Markets also seem unperturbed by the launch of Belgium's new 10-year Euro

benchmark syndicated bond and so far very little push back of the hawkish

leaning ECB minutes from some of the dovish members of the ECB. There is no

further EGB supply today

- There is continued uncertainty if Germany's SPD membership will back grand

coalition talks after Berlin chapter of SPD votes against starting talks.

- EMU periphery have started on a strong footing, outperforming Germany with

10-yr Bund/BTP spread 2.9bp tighter and Bund/Bonos and Bund PGB both around

1.6bp tighter.

- There is only Italy final Dec HICP released at 0900GMT, so attention likely to

be on any further comments from ECB GC members and UK inflation data at 0930GMT

with expectations that it will drop back down to 3.0% on a yearly basis.