Most core bond price action in the......>

EGB SUMMARY: Most core bond price action in the morning was driven by hopes that

a Sino-US trade war can be averted and upward revision to French Q4 GDP, but

this faded in the afternoon and EGBs gradually recovered as EU stocks reversed

gains and as a number of EU countries expelled Russian diplomats in response to

the poising in the UK. German 10-yr Bund yield unchanged at 0.527%.

- ECB hawk Weidmann said "Markets expect a first hike in interest rates at about

the middle of next year, that is probably not unrealistic".

- A combination of growing political concerns (Northern League and M5S have said

that they will sit down for coalition talks) and weight of upcoming BTP supply

finally took its toll on Italy with 10-yr Bund/BTP spread now 4.2bp wider at

139.3bps close to session highs. Bidding for the new 2-yr CTZ was fairly average

even though there is a CTZ maturing this week.

- Spanish debt is clinging onto its outperforming following an upgrade by S&P

after the close on Friday and following arrest of former Catalonia leader

Puigdemont. The rating hike potential was heavily traded last week and the

Bund-Bonos 10Y spread is now little changed on the day at 73.9bp vs 70.8bps low.