Prompted by the weak equity market......>

EGB SUMMARY: Prompted by the weak equity market overnight, there was an

extremely bullish start to Wednesday. Several explanations for the strength were

provided:

- Break of the 200d moving average for the Bund, break of the seven week bull

channel, strong gilts, upcoming month-end extensions and large cash inflows in

April.

- France is selling a new 18Y OATei with spread set at OATei 0.70% Jul-30 + 27bp

area. Last update showed a book in excess of E10.75bln including E3.15bln JLM. 

- Italy sold CCTeu, BTP 5Y and BTP 10Y. The first two saw a decent bid but the

10Y BTP was weak and in the moments into the bidding deadline the BTP market

fell sharply. Much has been recouped at the Bund-BTP spread is little changed on

the day.

- Flows have mostly explored the downside using Schatz option. We have heard of

profit taking in the belly of Spain although volumes were low. Also there was a

cash Bund seller at around 159.55 that was taking profit after buying earlier in

the week.