Bunds weakened in the morning as........>

EGB SUMMARY: Bunds weakened in the morning as evidence that that Swiss National

Bank was not intervening in FX markets as sight deposits actually declined.

However, the impact was fleeting and by the middle of the European morning, the

drop in Bund prices had reached its worst point.

- The turnaround was aided by a decent-sized Bund contract purchase of 7980

contracts but the Treasury market also pulled EGBs higher.

- The BTP market was buoyed by two elements: a lack of peripheral supply and

some surprisingly good Italian corporate results. The Bund-BTP spread tightened

3.5bp to 152bp and a new low for the year. The strength in the periphery was not

reserved for Italian debt and the Spanish market tightened 3bp to 10-Year

Germany, closing below the 100bp level at 98.5bp.

- By the end of play, the 10-Year yield was little changed at 0.465%, with a

subtle upward pressure upon more shorter dated German bonds.

- In terms of supply, KfW made a quick E1bln tap of their 2032 bond but

otherwise, the market is mostly talking of potential supply from BAT, albeit

most of this is likely dollar-based.