There was considerable pain in..........>

EGB SUMMARY: There was considerable pain in European debt this morning and the

pain was spread fairly uniformly around. The big trade was duration and curve

rather than spreads. Futures activity was dominant but there have been

surprisingly few blocks.

- The 10Y Bund contract is down 72 ticks at 161.51 and nearly all of the move

can initially be blamed upon the Germany State CPI releases that corresponded to

a 0.1% upward surprise in the national HICP reading. 

- The 10Y Bund yield is 4bp higher at 0.577%, but still 4bp below the 19 month

peak of 0.619%.

- Some bargain hunting has been seen in the past half an hour but the market is

nervous. This is not a risk-related trade as equity markets are also down quite

heavily. The CAC is leading the charge lower with a 1.6% decline.

- The curve bear steepened from the 30Y and there was no strong change in the

concavity of the yield curve; no underperformance of the 5Y or anything fancy.

- Italy sold a new 5Y alongside 10s and CCTs. These are weighing on Italian debt

slightly more so that the Bund-BTP spread is 2bp wider at 158bp.