The front-end of the German curve has...>

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.