The main theme in European debt.........>

EGB SUMMARY: The main theme in European debt markets has been the firm bid at

the long end of the peripheral curves because while the core markets have shown

a small amount of volatility, they are essentially unchanged.

- Thus far, the Bund yield is +0.3bp at a yield of 0.437% and movements along

the remainder of the curve have been small.

- By contrast, Italian and Portuguese 10Y spreads are 2bp tighter to Germany,

Spain 4bp tighter and the Greek market 7.5bp tighter.

- In terms of data, the extremely volatile German retail sales report showed an

above-consensus 4.4% annual gain in November, French December consumer

confidence was smartly above consensus at 105, up from 102 and the only bond

bullish release was that Eurozone core CPI repeated the 0.9% annual gain in

December, disappointing an expectation that it would hit 1%. 

- There has been very little reaction to any of the data releases.

- A heavy US data schedule has dampened volatility this morning.