After rallying on the open, Bunds.......>

EGB SUMMARY: After rallying on the open, Bunds have reversed some of their gains

through the afternoon session in what has been a fairly quiet session as many US

market participants are out of the office ahead of 4th July.

- The morning rally was trigged by the announcement yesterday that Christine

Lagarde has been nominated to be the next President of the ECB. Although not a

lot is known about her monetary policy views, her nomination means that Weidmann

is no longer in the picture. As he had been seemingly gaining ground in the odds

for the position, an appointment other than him would always have been viewed as

less hawkish.

- This morning's services PMIs were broadly a little better than expected, but

saw little market reaction.

- Peripherals have performed well in general but BTPs have been the clear

outperformer. 10y BTP yields have fallen over 20bp today on the back of

headlines that have stated that the EU will not open EDP procedures against

Italy. 10y yields have not been lower since 2016.