A decent start to trading was quickly...>

EGB SUMMARY: A decent start to trading was quickly surrendered following strong

IFO data and soon after, Bunds followed the Gilt market lower as UK GDP data

came in stronger than expected. The contract is currently trading around the

lows of the day.

- The German Finanzagentur sold E3.0bln of the 10-year benchmark 0.50% Aug-2027

successfully with a bid-to-cover ratio of 1.7 times coming in higher than the

previous 6 auction average of 1.48 times.

- The spread between the Bund-Bonos tightened by 3.3bp to 115bp as Spanish PM

Rajoy commented in Parliament that the only solution to the Catalan problem was

through fresh elections in the region. Italian spreads to Germany were largely

stable.

- There was a very large payer of 7Y swaps soon after 0900BST that was passed

around the street several times. There was also a decent underperformance of the

7Y sector of German curve that may have been influenced by the swap trade. 

- There is little to distract the EGB markets now until the ECB meeting

tomorrow.