There was a large'ish knee-jerk.........>

EGB SUMMARY: There was a large'ish knee-jerk reaction to the Italian election

result but the selling of BTPs and buying of the core settled down quickly.

- Small HF sellers seen in the 5-7Y area early on but cash volumes were slim,

traders said most activity was futures-led.

- Stop-losses seen in BTPs vs Spain trades and this helped push Bund-Bonos

spread 2bp tighter to 88bp. Generally, the reaction was fairly contained in

Italy.

- The 10Y Bund yield was last down 2.6bp at 0.624% and the German yield curve

flattened 2.4bp to a 5 week low of 118bp.

- European data showed a slightly weaker final Feb composite/svs PMI reading.

Eurozone Jan retail sales were in line with expectations at 2.3%Y/Y.

- Futures contract roll activity was understandably intense. Schatz and Obl

rolls appear to be progressing slower than the fast moving Schatz.

- Tuesday see Austrian 4Y and 10Y auctions and two Bundei linkers being sold.