The EGB market performance has been.....>

EGB SUMMARY: The EGB market performance has been split down the middle: core and

semi-core markets have put in a dismal performance and the 10Y Bund yield is

+3.7bp at 0.68% but 10Y peripheral spreads to Germany are 7-10bp tighter.

- Much of the movement came before North Korean headlines hit screens as

investors began to capitulate on bearish Italian election trades that were not

working out.

- Late European morning headlines that North Korea will hold a Summit with South

Korea in April and is open to de-nuclearise if safety could be assured.

Furthermore, North Korea would not fire any missiles while talks with South

Korea continued and this all led to another large drop in the Bund contract. The

bullish Bund contract channel from mid-Jan has been broken to the downside.

- German linker auctions had mixed results, the Bundi26 was strongly bid, the

Bundei30 was weak. Austria 4Y and 10Y nominal auctions were fairly average.

- Flows are still said to be fairly light in the Italian cash market. We heard

of some buying of short dated OATs very early on.

- The Bund-BTP spread is 6.5bp tighter at 129.5bp.