Bunds soured from the moment that.......>

EGB SUMMARY: Bunds soured from the moment that European trading got underway,

responding to events surrounding North Korea. 

- All the usual risk-averse assets performed strongly with notable movements by

gold, that hit its highest since November and the EURUSD that moved above 1.20%.

Even JGBs got in on the act and almost touched 0%. 

- That risk-off move was sustained all the way up until the Schatz auction,

which was very poor and technically uncovered. At its best, the Bund  10Y yield

was 5.5bp lower on the session but is now only 4.5bp lower at 0.331%.

- Peripheral debt performed very poorly relative to Germany although absolute

yield changes have been close to zero, with the spread enlargement and

compression mostly led by German curve movements. Currently, the Bund-BTP spread

is 4.6bp wider at 175.2bp. 

- EFSF is busy selling a 2040 maturity security, books closed with over E2.4bln

of orders excluding JLM and the market is awaiting pricing.

- Economic data has been fairly limited and headlined by July French consumer

spending numbers that were robust but close to consensus.