In the morning on Friday, hopes that....>

EGB SUMMARY: In the morning on Friday, hopes that the SPD was open to talks with

Merkel's CDU/CSU and and all-time high in the ifo index sent the Bund contract

much lower.

- The Bund contract based out at 162.67 before buying showed up.

- While bunds started weak, the semi-core was even weaker and there was the

typical chatter of Japanese selling; common when French debt underperforms early

on. Yet, the Irish debt market was also under pressure and a sudden flare up in

domestic politics threaten to bring down the government as early as next week.

- Semi-core markets stabilised and recovered some lost ground by mid-morning.

French/Dutch/Belgian spreads to Germany were 0.75-1.0bp wider in 10Y heading

into the close. The Bund-Irish spread is +1.75bp on Friday to 24.7bp.

- In the European lunchtime, peripheral spreads widened smartly in a sudden

flurry of futures market trading. The Bund-BTP spread widened from 143bp to

146bp and pulled back about 0.5bp in the afternoon.

- Calendar roll activity is rising. The Schatz Dec-Mar rose to a quite rich

0.127 cents. Other rolls are quite stable.