EGBs opened lower mostly because of.....>

EGB SUMMARY: EGBs opened lower mostly because of overnight strength in the yen,

in turn linked to comments from Japanese Finance Minister Aso that there was no

plan to intervene in FX markets. However, the path for most EGB bond prices

since then has been slowly lower.

- The weight of supply has been intense but generally speaking demand has been

good, particularly in the Spanish auction. However, the Gilt 1.75% 2057 auction

saw some very volatile price action leading into the auction cut-off that

contributed to a weak looking auction and so Gilt market weakness spilled over

to the EGB space.

- Another factor adding to debt market weakness is the steepening of the yield

curve that has created some stop-losses on curve positions. The 2-10Y Bund curve

2.2bp wider and no sitting at it widest spread since 2014 at 134.2bp.

- Peripheral bonds are outperforming the core; the Bund-BTP 3bp tighter at 128bp

and the Spanish equivalent back to 72bp, a 3.5bp tightening. However, Greek

yields have tightened by a massive 25bp today (although it was 30bp earlier).