After a slow start Bunds have slowly....>

EGB SUMMARY: After a slow start Bunds have slowly drifted higher, curves bull

flattening helped by slight downward revision to Eurozone manufacturing PMI,

decent upward price action in futures in wake of good demand at 10-yr Gilt and

2-yr Schatz auctions. German 10-yr Bund yield last 2.2bp lower at 0.521%.

- It was a steady start in the European Government Bond markets with the 10-year

Bund initially trading in a tight 19 tick range with little direction seen

overnight. The US Dollar was slightly weaker due to continued political turmoil

in the US. While the RBA decided to leave rates unchanged as expected.

- Bund started to squeeze  higher as French final mfg PMI was revised lower

which weighed on overall EMU mfg PMI. Consistent but small buying out the German

curve in illiquid summer markets, decent demand at both 10-yr Gilt and 2-yr

Schatz auction then helped Bunds tick higher. Some also suggested market tried

to go short into month-end/supply and were now covering those positions. 

- EMU periphery have given up earlier gains versus German Bunds as support from

large Spain and Italy redemptions diminish as Bunds squeeze higher. Markets also

looking ahead to Spain supply on Thursday.