There were a few bumps along the way....>

EGB SUMMARY: There were a few bumps along the way but the EGB market was strong

on its first day of trading after the christmas break.

- The 10Y Bund yield was heading into the close at 0.386%, a 3.4bp decline on

the day. Much of the movement came in the European afternoon as the market rode

on the tail of a very strong US Treasury market and so the Bund curve flattened.

There was considerable attention on the S&P dividend yield and the 2Y UST moving

into alignment.

- Carry centric parts of EGB space, like the short end of the Italian market

were under considerable pressure on Wednesday, perhaps as investors were heading

back to more market neutral position.

- The 10Y spreads of Italy, Spain and Portugal uniformly widened to Germany by

3bp each.

- Italy sold a 2Y CTZ with little fanfare in a very quiet market. 

- Tomorrow sees another round of Italian auctions and Friday has month-end and

quarter extensions (not very helpful for EGBs) and German preliminary German CPI

data.