The European government bond market.....>

EGB SUMMARY: The European government bond market is being almost entirely driven

by risk-sentiment rather than anything fundamental today.

- For the sake of completeness, German orders for December jumped well above

consensus to 3.8%M/M and German Union IG Metall agreed a complicated wage

settlement that market contacts estimate to be worth a robust consistent with

annual wage increases of 3.7% in 2018, and 4.1% in 2019.

- On the supply side, the new 15Y Finnish deal being done by syndication appears

to be going well with >E9.25bln book for E3bln being sold. We hear that the

Greek 7Y was put on ice until markets calm.

- Germany issued E1bln of a 2026 linker, without any difficultly.

- Equity markets were mostly trimming losses in early Europe and this took the

debt market lower. However, equities have 'stabilised' and buying has shown up

for core European bonds. The 10Y Bund yield is down 5.6bp to 0.681% with a bull

flattening. Peripheral spreads to Germany opened wider but only Greek and

Portuguese spreads have widened since the first moments of trading.

- There was a large TY-RX block trade, selling TY.