Bund trading volumes were huge on.......>

EGB SUMMARY: Bund trading volumes were huge on Tuesday. Morning trade started

with a firm bid to peripheral European debt markets but then core markets

weakened slightly in the lead up to the Dutch DDA auction.

- It quickly became clear that the DDA was building a large order book and EGB

yields declined suddenly and rapidly. Volumes were very heavy in the Bobl

contract leading the 5Y German swap spread and particularly the Bobl invoice

spread wider. However, the big swap spread movements are concentrated in the

dollar market and the 2Y in particular.

- The Italian auction was a mixed affair with light bidding for the new 7Y BTP

but the 30Y did well. Since the Italian Treasury allocated only E0.96bln to the

2018 the 30Y sectors of peripheral curves leapt higher.

- Another sharp upward movement in the bund contract came as the 10Y DSL was

priced but the high print of 157.61 was the high water mark and the EGB market

slipped lower after the US CPI and Gilt remit news and through the afternoon.

Heading into the close the 10Y Bund yield is -0.5bp at 0.667%. Bund-peripheral

spreads are stable although Bund-PGB hit an intraday 8 year low of 117bp.