European government debt markets........>

EGB SUMMARY: European government debt markets perhaps could have done better at

the open given the overnight equity futures declines but the opening was

relatively flat. However, weak German State CPIs have largely come on the weak

side and this is provided a decent bid to the core EGB markets.

- There wasn't any concession leading into the BTP/CCTeu auction this morning.

Heavy peripheral redemptions/coupons and a block trade in futures (3k IKH8 @

136.39 vs RXH8 @ 2,474 @ 159.11 drove spreads tighter). 

- About one hour before the auction cut-off, the Bund-BTP spread was 3bp tighter

at 131bp but then the market went into reverses as the strong bid evaporated.

The auction was mixed with the new 10Y BTP encountering weak demand but still

seeing the Italian Treasury selling the maximum amount. As a result, the

Bund-BTP spread is back to 134bp.

- Aside from German State CPI data, Eurozone flash Q4 GDP hit 0.6%Q/Q, as

expected but the January economic confidence made a modest drop, down from 115.3

to 114.7.

- 2Y German is -0.8bp at -0.533% and 10Y -2.0bp at 0.674%.