Core European bond markets are.........>

BOND SUMMARY: Core European bond markets are brushing off German political and

global trade concerns and have reversed opening small gains as UK manufacturing

PMI remains steady. While US Treasuries have faded from intra-day highs.

- US Tsys edged higher in late Asian trade supported soft export components in

the latest round of Chinese manufacturing PMI surveys and then extended gains on

political uncertainty in Germany. Prices have since faded though. US 10-yr is

-2.9bp at 2.831% vs low of 2.822% and 2s/10s 1.7bp flatter.

- German 10-yr Bund has reversed modest opening gains despite uncertainty

surrounding the German coalition as Seehofer threatens to resign and slight

downward revision to Eurozone manufacturing PMI. German 10-yr is +0.7bp at

0.309%, with 10s/10s curve 1.2bp steeper

- Italy 10-yr spread to Germany has pared earlier widening move following strong

mfg PMI and large reduction in unemployment. 10-yr Bund/BTP spread is 3.5bp

wider while Spain and Portugal are 1.8bp tighter

- Gilts have also pared earlier gains as mfg PMI remains steady rather than

dropped lower. 10-yr Gilt is 0.9bp at 1.27% with 10s/30s 0.8bp steeper.