There was strong demand for the 30Y.....>

EGB SUMMARY: There was strong demand for the 30Y sector of Germany and,

particularly, France on Friday. The 10Y Bund yield was going into the close down

1.5bp at 0.301%. But, movements were quite erratic. 

- Initially peripheral debt markets were strong, even if the Italian market felt

heavier than the others all through the day. Greek 10Y yields fell below 4% and

tightened the spread to Germany by another 12bp. Portuguese 10Y spread also

traded smartly below the better-rated Italian 10Y.

- As the close approached, it looked like the popular trade of recent month

(being long Italy vs Spain and Germany) was being unwound. The Bund-BTP spread

was 3bp wider on the day.

- A lot of attention was on the EURUSD cross currency basis swap, which

collapsed on Friday to -102bp. Last year, the move presaged a shrinking of the

EGB repo markets but this does not appear to be the case this time. 

- Interestingly, news that the US tax plan is done gave a small push to equities

but the impact on bonds was fairly small.

- Fitch updates its Portugal rating later. Markets expect an upgrade to IG.