Peripheral EGBs gave up most of their...>

EGB SUMMARY: Peripheral EGBs gave up most of their gains following an early

risk-on rally, while core markets strengthened after earlier weakness amid

concerns of an increasingly hawkish ECB. 10-year Bund yields were up by 5.2bps

at the high at 0.517%, but have since moved lower, last down 2.8bps at 0.493%.

- Italian yields dropped sharply in the morning, but crept back up of the course

of the afternoon to finish a little higher, with the 10-year up 2.3bps at

2.960%. Overall the spread over Germany dropped by 0.6bps to 246.7bps, erasing

most of the gains of the day that brought the spread to a low of 232.4bps.

- Spanish bonds outperformed on the day. The 10-year spread over Germany fell by

9.1bps to 94.4bps, following a solid bond auction in the morning.

- The Euribor curve bear steepened with a 3.5-4.0 tick move lower in Blue

contracts and little change in White and Red contracts.

- Few data points worth watching on Friday. German industrial production should

offer more colour to the weak factory orders data Thursday morning. ECB's Mersch

due to speak Friday at a risk conference in Paris.