Tuesday was a bad day for bonds.........>

EGB SUMMARY: Tuesday was a bad day for bonds. Initially, hawkish comments from

Benoit Coeure when he spoke of "a reasonable chance that bond buying would not

be extended" and sent the 10Y Bund yield up 3bp to 0.46% and German debt was

underperforming all markets except Ireland.

- Weak Gilts also acted as a drag on core EGBs.

- Around the middle of the European morning, Italian debt came in for a period

of heavy selling and the Bund-BTP spread leapt from 155bp to 162bp. No news

accompanied the move but some futures flows were seen.

- EGB markets calmed once the US opened. However, the Treasury market suffered a

similar experience to the Bund and quickly ran into a flow related move lower in

price. Bunds made a half-hearted attempt to follow the Treasury market lower.

- Ireland announced a much-anticipated May-28 syndicated deal in the afternoon,

although there was a conspicuous lack of primary issuance for the start of the

year.

- Going into the close: Schatz +1.3bp at -0.614%, Bund 10Y +2.7bp at 0.455%.

Bund-BTP was +4.4bp at 163.3bp.