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

EGB SUMMARY: The front end of the German curve has undergone some very

disjointed trading because of the absence of traders today. For instance, a 14

Dec 2018 Schatz has spiked 8bp higher today, likely resulting from the fact that

it will fall out of bond indices tomorrow and there is a lack of balance sheet

to soak up the trading. Around an hour ago, selling in the 30Y Bund caused a

strong underperformance of that sector of the curve. 

- Generally, yields are higher in core Europe but usual correlations between EGB

debt markets are in shatters. The 10Y Bund yield is 3.7bp higher to 0.419% and

that change is fairly representative of what is happening elsewhere on the

curve. The 2Y Schatz is most interesting as it reaches the highest yield since

July.

- Peripheral debt markets are outperforming despite the Italian BTP/CCTeu

auction today. The 10Y Bund-BTP spread is 5bp narrower and very similar to the

spread movements in Spain and Portugal. Bunds are also underperforming the EUR

swap curve fairly significantly. The PSPP does not get underway again until Jan

2 but there is a E20bln Bund redemption on Jan 4.