EGBs came under early selling...........>

EGB SUMMARY: EGBs came under early selling pressure as Europe opened, more

because the path of least resistance appears to be lower at present, rather than

because of any economic data or news. 

- There was a pause in the selling but Italian debt has reversed some of its

stellar gains from yesterday; the 10Y Bund-BTP spread sat 4.0bp wider at one

point but in the chaos of the payroll report, the selling was very concentrated

on the German curve and this enabled the Bund-BTP spread to re-tighten so that

the 10Y Bund-BTP was only 1.5bp wider going into the close at 126bp. We heard

that Thursday's strong BTP price action was driven by Hedge Funds.

- The employment report prompted an aggressive curve steepening across the EGB

space; the 2-10Y German spread widened by 3bp by the close but evident short

positioning meant that the Schatz yield was only 0.5bp higher. 

- The eurostoxx index dropped 1.4% but even weak equity markets failed to

provide obvious support for government debt markets. 

- The 10Y Bund yield has surpassed the 0.75% level and is at its highest since

July 2015.