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Market Roundup: Bonds Tracking BTPs

US TSYS
Tsys trading firmer, off midmorning lows to near top end session range, yield curves bending flatter (2s10s -2.806 at -74.770) with Bonds leading the rally.
  • Short end lagging amid moderate deal-tied rate locks and pre-auction short sets ahead today's $42B 2Y note auction (91282CGG0).
  • Cross-market: while Tsys tracked German Bunds around the NY open, latest appears to be tracking Italian bonds w/ BTP 10Y yld -.11 at 3.92. No obvious headline driver for move in BTPs though ECB hike pricing has receded slightly on recent ECB Panetta comments:
    • ITALY’S FISCAL POLICY HAS REMAINED PRUDENT .. CAN AFFORD TO BE `ANXIOUSLY OPTIMISTIC' ON INFLATION .. WE SHOULD REASSESS SITUATION IN MARCH, Bbg -- but not enough to justify such a rally.
  • Underlying theme - market depth remains thin and relatively easily moved on smaller orders.

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