European government markets have........>

EGB SUMMARY: European government markets have mostly shown strength in the

morning's trading session, recovered from a weak opening.

- The German government Grand Coalition talks have reached an agreement although

the impact upon the Bund market was extremely marginal. 

- The big mover this morning was the BTP market, which in the space of 5 minutes

saw the 10Y spread to German tighten by around 3bp. Halfway through this move,

there was a Block trade that looked like a stop-loss but many have ascribed the

original move to reinvesting the BTP redemption that comes on Monday. Next week,

also sees Dutch and Austrian redemptions and the combined C+R cash flows amount

to E46bln. other peripheral markets have hardly budged against Germany.

- France announced that it will sell E6.5-7.5bln of OAT 0% Feb-21 (new), OAT 0%

Mar-23 and OAT 2.25% May-24. Also, E1.25-1.75bln of OATei 0.25% Jul-24, OATi

0.1% Mar-28 and OATei 0.7% Jul-30 at next Thursday's auction.

- The bond market is awaiting the release of US CPI and retails sales later

today. Again, the 5Y sector of EGB curves is the weakest. The 10Y Bund yield is

almost unchanged.