Periphery EGBs are outperforming........>

EGB SUMMARY: Periphery EGBs are outperforming while core bonds are weaker.

- German bonds have weakened steadily after a strong open, with the belly of the

curve underperforming. 2-Yr yields are up 0.6bps at -0.593%, 5-Yrs up 1.1bps at

-0.235%, and 10-yrs up 0.7bps at 0.338%.

- 10-Yr Bunds sold off sharply going into auction this morning which was barely

technically covered (1.0x real cover), selling at 0.33% yield.

- Periphery EGBs continue to rally, in contrast. Italian BTPs are leading the

charge, with the 2-yr outperforming in a bull steepening move, down 4.3bps at

1.021%. However, this is off the 0.989% low set mid-morning.

- Spanish yields are a little lower with the curve bull flattening, as 10-Yr

yields have fallen 1.3bps to 1.356%, with 2-yr yields down 0.8bps at -0.346%.

- In contrast to bonds, rates are relatively unmoved, with the Euribor futures

strip basically completely flat, though there is some weakness (down 0.5 tick)

in 2020 contracts.

- Minimal data flow and choppy price action leave EGBs likely seeking direction

from global headlines, including Fed minutes later.