Italian debt initially got off to a.....>

EGB SUMMARY: Italian debt initially got off to a strong start on Tuesday and

Bunds started weak. That soft beginning was somewhat reversed upon the release

of  soft Saxony CPI data but subsequent German State CPI data were in line with

expectations and together with strong January M3 data (pushed higher by TRLTO-II

linked lending), EGBs sank.

- Some of the initially good BTP performance suffered ahead of a rather average

auction set. That temporary weakness was quickly reclaimed and heading into the

close the Bund-BTP spread was 3.6bp tighter at 133bp.

- In the afternoon German HICP posted a consensus-matching 0.5%M/M. 

- The written testimony from Powell unleashed a UST rally that EGBs rode on the

coat-tails of. However, while BTPs continued to rally, the impact of the

testimony upon USTs/Gilts and core EGBs reversed.

- The Bund 10Y yield is 1bp higher at 0.66% approaching the close. Tomorrow sees

a E3bln tap of the Bund 10Y bmk and month-end extensions. Bloomberg-Barclays

Euro Agg Tsy index extension was revised higher to an elevated 0.10Y.

- The 10Y Bund yield