Bunds slipped mildly at the open but....>

EGB SUMMARY: Bunds slipped mildly at the open but by lunchtime, thoughts of

bearishness had been long since forgotten.

- Reasons for the subsequent rally began with a decent Austrian auction and a

very strong order book for the 50Y Gilt and a KfW EUR deal. The KfW was said to

have helped the swap curve as KfW deals are often swapped.

- A Trump tweet about selling more high tech weapons to South Korea and Japan

sent a risk-off shiver through markets that included a jot higher to Bunds.

- Some years back, risk-off meant wider Bund-swap and Bund-peripheral spreads

but not these days. As yields fell, the Bund-BTP spread tightened 2bp to 165bp. 

- Along the German curve, the 5Y section of the yield curve was very strongly

bid, as was the 30Y. The 10Y section of the German curve struggled to keep pace.

A source mentioned more aggressive ECB purchases, particularly in the German and

SSA space.

- There was a lot of interest in a Norges Bank letter to its Finance Ministry

that recommended many portfolio changes but there was no obvious market

reaction.