There has been a small slip in EGBs.....>

EGB SUMMARY: There has been a small slip in EGBs at the start of Friday's

trading with the market looking forward to the German Ifo index and also

reacting to news that the German SPD is open to Grand Coalition talks with the

CDU/CSU.

- The 10Y Bund yield is 1.1bp higher at 0.358%, with the 8-10Y section of the

curve leading the rise in yields.

- Cash UST trading resumed last night, following the Thanksgiving break and the

2.1bp rise in the 10Y tenor reflects a catch-up trade. Chinese stockmarkets are

close to unchanged on the day following their 2% decline on Thursday.

- The Italian BTP market is outperforming marginally, tightening the spread to

10Y Germany by 0.7bp; the spread having been largely directionless for the past

three weeks.

- Looking ahead to next week, EGB supply looks to be a modest ~E9bln and all

from Italy. After the close tonight, the Italian Treasury will announce issues

and amounts for the M/L auction next Wednesday. Bloomberg-Barclays are

projecting a 0.04Y month-end increase in the Pan-Euro Agg Tsy index duration.