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Early Bid Holds


Still Heavy


(Z1) Holding Gains

EGB SUMMARY: There was a strong start to trading as China's SAFE denied that
they were about to slow or stop UST purchases. EIB quickly announced that it
would sell 30Y debt, which ultimately turned into a E2.5bln sized issue.
- Peripheral debt was strong throughout the morning and the tightening of
spreads breezed through fairly lacklustre 3Y and 7Y BTP auctions.
- The game-changer was the release of the ECB Minutes, which suggested that the
ECB might change forward guidance fairly soon. This hit the EGB space hard. The
5Y Obl initially hurt most, then the 2Y yield rose later on as heavy put buying
showed up in futures. Towards the close, another wave of selling swept through
in the 5Y sector.
- Heading into the close, the German Schatz was +5.3bp at -0.562%, the 5Y +8bp
at -0.113%, the 10Y +5.3bp at 0.596% and the 30Y only +2.4bp at 1.348%.
- The movement in core-periphery spreads was unorthodox with Portugal performing
strongest, Greek debt widening 9bp to a weak German 10Y.