Bunds weakened through the morning as...>

EGB SUMMARY: Bunds weakened through the morning as the risk-off trade went into

reverse. The initial movement was driven by an absence of news surrounding the

Korean peninsular but China also banned imports of some North Korean products.

This added to hopes that China was working toward a peaceful solution and sent

Bunds lower still.

- Peripheral spreads reversed several days of weakness with a good rebound. The

Bund-BTP and Bund-Bonos spreads tightened 5.5bp and 6bp respectively. There have

been a steady stream of positive stories in the media about peripheral economies

and even German growth. The Bloomberg consensus for 2017 Eurozone GDP growth is

now 2% compared to 1.2% a year ago.

- Futures volumes were decent and the Bund roll appears to have initiated and

the spread was trading close to 2.90 points for much of the day.

- Economic data was limited to Eurozone IP showing a 0.6% contraction in June,

close to expectations and weak Q2 Portuguese GDP.

- The Bundesbank's Dombret gave a fairly dovish speech, stressing the need for

continued accommodation.