Peripheral markets started the..........>

EGB SUMMARY: Peripheral markets started the trading session strongly and the

Bun-BTP spread quickly tightened by around 2bp. A weak Saxony CPI print

initially gave Bunds a small nudge higher in price; the market seemingly

ignoring the stronger Spanish numbers. 

- Minutes later there was a strong slide in the Bund contract that ultimately

culminated in the print of a large risk reversal in the Bund contract at 0930GMT

which several sources identified as 15k Bund Apr 156 Puts were bought vs selling

158 calls at 30/29. The delta was negative for this large sized trade but

despite this fact, scaled buyers were noted below 159.17 and the contract

stabilised and recovered marginally.

- German State CPIs could be blamed for the slide in Bund but only in that they

did not reinforce the initially weak Saxon CPI. Strong EZ M3 data were also

released showing TLTRO-II inspired lending to NFCs and Eurozone economic

sentiment for Feb, printed close to expectations.

- Italian auctions passed without a hitch. Currently, the Bund yield is +2.2bp

at 0.674% with the 2-5-10Y fly showing more weakness in the belly.