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. 

- BTPs moved rapidly helped by reinvesting the BTP redemption that comes on

Monday, the spread movement was helped by stops in the IK future. The Bund-BTP

fell 6bp on the day to 140.7bp, the lowest spread for a month.

- The Bund market then fell as the US core inflation rate surprised to the

upside although soon after the Gilt market collapsed as there was a report that

Spain and the Netherlands want a soft Brexit. Yet EGBs did not follow the Gilt

market lower.

- Along the curve, the 5-7Y sectors of most EGB curves. However, the 2-5-10Y

butterfly spread is still some way from breaking new ground. 

- Once again, there was very strong demand in the 30Y part of the curve and with

the new Bund bmk the 10-30Y spread is at 73.3bp, the lowest since April.