Another bullish day for Bunds, with.....>

EGB SUMMARY: Another bullish day for Bunds, with the release of the weak US PPI

data allowing the contract to convincingly break through yesterday's high price

of 163.99. The rally extended later in the afternoon but the move was mostly

based upon the risk trade, rather than US economics.

- A theme through the day was a rise of implied vols: the VIX, EUR3m10Y

normalised implied, RX 2 month 50 delta or whatever, it was all rising. 

- Equities were suffering in the risk-off wind blowing through markets and the

Eurostoxx shed 0.7%. However, not all risk-free assets were strong as the

swissie saw little movement.

- Bunds were in demand in the EGB complex but BTPs were not. The 5Y part of the

Italian curve (a roll and carry trader darling) was well offered. The Bund-BTP

spread widened 3bp on the session to reach yesterday's peak at 160bp.

- The Bund roll came to life today although other contracts are lagging.