The Bund contract started soft at the...>

EGB SUMMARY: The Bund contract started soft at the open but in an identical to

early trade yesterday buyers of core Europe arrived and floated prices higher.

- However, without any apparent news, there was yet another sudden and large

lurch lower in the BTP market, led from the long end of the curve. This was

matched by a move higher in the Bund market in what looked like a classic

Bund-BTP trade. Some noted that Berlusconi has touted a moderate and old friend,

Antonio Tajani as the next PM if the Centre-Right becomes the largest coalition.

This was suggested earlier this week but is attracting some attention today.

Others mentioned the auctions later this morning as a catalyst.

- However, the BTP selling was short-lived, and having widened 4bp to 140bp, the

Bund-BTP spread is back to 138bp.

- The second reading of German Q4 GDP reaffirmed the previously released 0.6%Q/Q

gain. The main release today will be the final Eurozone HICP release at 1000GMT,

which also comes at the same time as the cut-off for the Italian CTZ and BTPei

auctions. After the European close, Coeure will participate in the panel in NY

at 1830GMT.