Most of the big market activity.........>

EGB SUMMARY: Most of the big market activity occurred in the first few hours of

trading. A small drop for the Bund contract quickly gave way to larger

futures-led sales.

- Trading was flow- rather than event-driven through the morning and with the

Veterans day holiday, all markets settled down into a stable afternoon.

- The German curve showed another bear steepening, led by the 30Y section of the

curve. The 10-30Y German spread returned to the 89.5bp peak seen at the end of

October. This is particularly impressive given that the 2-10Y equivalent has

very stable around the 108-118bp since the summer.

- Note that Spain included a 2066 maturity security in the choice of bonds that

it will sell next Thursday. 

- Breakeven inflation rates were also hitting recent highs today. The 10Y French

OATei breakeven rose another 1.1bp to 1.402% on Friday, even though France

announced that it would only sell OATei at next Thursday's auction. The EUR 5Y5Y

forward inflation rate is at 1.676%, its highest since March.