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(U2) Off Lows, But Still Fragile


Another Round Of Richening


(U2) More Stable But Still Fragile

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EGB SUMMARY: The front-end of the German curve has underperformed today, but the
10Y part of the curve has remained almost unchanged. The 10y Mar-18 Bund
contract looked weak early on the back of news that Congress would pass a tax
code overhaul with a Senate vote expected as early as Tuesday, however, as the
day progressed price recovered. Trade remained choppy with price oscillating to
and fro near yesterday's close of 163.47. 
- The main story in the EGB space was that Portugal's credit rating was upgraded
by two notches by Fitch from BB+ to BBB on Friday. The Bund-PGB spread tightened
sharply in early European trade reaching lows of 141.8bp, but the spread soon
recovered some of its losses and is currently trading 5.4bp tighter at 148.4bp.
- Following the Portuguese outperformance the Italian, Spanish and Greek bonds
were also bid on the day. Both the Italian and Spanish curves saw their
respective curves bull steepen. The Bund-BTP spread is 1.1bp tighter at 150.1bp
and the Bund-Bonos spread is 1.8bp tighter at 114.0bp.
- Looking ahead markets await Ifo Business Climate Index for December due to be
released tomorrow and the Catalan elections on the Thursday, Dec 21. 

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