It has mostly been a Brexit trade.......>

EGB SUMMARY: It has mostly been a Brexit trade today in Europe with hopes of a

deal and soft Brexit mitigating fears of the shock to growth when Brexit occurs.

The 10Y Bund yield rose from 0.339% yesterday to 0.372% before investors were

brave enough to buy. 

- German State CPIs were firmer-than-expected and the reliable indicator of

Eurozone growth, the economic sentiment indicator hit 16 year highs.

- For a change, markets have been cash- rather than futures-led and the 10Y

German benchmark appears to be leading the underperformance in micro-RV terms.

- More recently, Barnier has downplayed hopes of a quick deal and this has aided

a dip to 0.357% for 10Y Germany.

- Peripheral debt has outperformed significantly on Wednesday, with BTP and PGB

10Y paper around 3.5bp narrower to Germany. Spanish paper is lagging this move

slightly. Expect a lot of volatility from Portugal leading into the Fitch rating

decision on Dec 15.

- Italy successfully sold a combined 3.5bln of 10Y BTPs and CCTeu but given the

small auction size, it was not really a test.