The EGB market is trading softer on.....>

EGB SUMMARY: The EGB market is trading softer on Wednesday with a general theme

of bear market steepening. The much-watched the eurozone Markit PMI report

surprised to the upside and was the highest print since June 2006 helping to

nudge EGBs lower still.

- While the strong growth is fairly well-known, ECB policy is more dependent

upon the path of inflation and the PMI report showed evidence of increasing

inflationary pressure.

- The 10Y Bund yield is 1.4bp higher at 0.576%, while the 2Y Schatz yield is

unchanged. 

- There has been no sovereign supply today although EFSF and Lower Saxony have

been selling EUR debt and KfW announced a 10Y USD deal.

- The BTP market has underperformed in the wake of a large block trade: 4,486

OATH8 at 154.37 vs 5,099 IKH8 at 137.26 at 1000GMT. 7-20Y BTPS show yields that

are around 2.5-3.0bp higher.

- Ahead, the US sees existing home sales data and the US 2Y FRN and 5Y UST note

auctions.