The main theme over the morning was a...>

EGB SUMMARY: The main theme over the morning was a strong performance by the

Eurozone periphery. Initially led by Spain as investors traded a possible S&P

ratings upgrade on Friday that might create some forced buying. 

- The afternoon saw some profit taking but heading into the close, the Bund-BTP

spread was 7bp narrower at 133bp, Spain was 5.0bp tighter at 72.7bp and

Portugal, having earlier set a 8Y low has its spread 2bp tighter at 113.9bp.

- Bunds opened weaker on the session, mostly in response to news of a Brexit

transition deal. Mostly trading sideways thereafter, there was some heaviness in

the 10Y section of the German curve as the market is aware that 10Y auctions

(there is one tomorrow) are rarely well bid. A build up of a USD supply pipeline

also weighed on USTs and hence EGBs. 

- Germany sold E4bln of its 2Y Schatz benchmark. The auction was technically

covered if not witnessing strong demand.

- The German ZEW expectations index fell to 5.1 (low since Sep-16) in March from

17.8. Germany PPI data also printed on the weak side of expectations.