The German ZEW Current Situation........>

EGB SUMMARY: The German ZEW Current Situation indicator for January dropped

sharply (to 27.6 from 45.3 in December), while the expectations for economic

growth indicator came in slightly above consensus (-15.0 vs -18.5 survey). Bunds

initially inched lower before rallying. Yields are trading in the middle of the

day's range across the curve. Current yield levels: 2-year -0.591%, 10-year

0.247%, 30-year 0.852%.

- The French OAT selloff similarly started to reverse soon after 1000GMT with

longer end yields around 1bp lower from the highs. The curve is marginally

steeper since the open with 2s30s trading up to 206.7bps from a low of 205.9bps.

- It has been an uncharacteristically quiet session for Italian BTPs so far, no

doubt reflecting the fact that budget-related headlines have dissipated in

recent weeks. There is very little direction with yields oscillating within an

approx. 4bp range. 

- The longer end of the Spanish bond curve rallied from 1100GMT reflecting the

clamour of bidders for a 10r bond with the order book taking in over E50bln. The

10-year benchmark yield has dropped to 1.339% from a high of 1.358%.