The main story in bonds markets has....>

BOND SUMMARY: The main story in bonds markets has been follow through of the

Franco-German announcement yesterday of a EUR500bln recovery plan. Peripherals

have continued to rally with Spain and Portugal seeing more tightening than

Italy this morning.

- Core bond markets are reacting more to a little risk-off sentiment this

morning, however, retracing some of the moves seen yesterday. Treasuries are

outperforming Bunds and gilts.

- Demand for the gilt syndication has been very strong again with an orderbook

in excess of GBP52bln and a deal size of GBP7bln - this is for a 40 year gilt so

shows there is continued high demand for duration in the UK. This was in line

with our estimate in the Gilt Week Ahead.

- TY1 futures are up 0-8 today at 138-27 with 10y UST yields down -2.0bp at

0.707% and 2y yields down -0.6bp at 0.174%.

- Bund futures are down -0.35 at 172.81 with 10y Bund yields down -0.5bp at

-0.473% and Schatz yields unch at -0.700%. Gilt futures are up 0.04 at 137.52

with 10y yields down -0.5bp at 0.250% and 2y yields down -1.0bp at -0.13%.