Eventful morning for EGBs. Heavy........>

EGB SUMMARY: Eventful morning for EGBs. Heavy T-note future selling in Asian

time led to a drop in EGB prices at the open. Fears of a heavy supply schedule

amplified the move. However, EGB prices rallied and kept rising all the way

through the syndicated deal updates.

- EFSF 7Y, 10Y Portugal and 20Y BTP syndications all appeared to encounter

strong fonts of demand. Contacts mentioned that Central Banks were in the

Portugal deal, helped by the recent ratings upgrades. 

- This rally all stopped when Bloomberg headlines reported that China saw little

value in Treasuries and would slow or stop buying. The 30Y UST suffered most,

rising by 4bp at one point. EGBs suffered alongside but have sine recovered.

- Two minutes after the Chinese news hit was the cut-off for the Bund auction.

Perhaps because of the market volatility, the new Bund had a technically

uncovered auction, with only 4bln of bids for the E5bln for sale.

- With the strong books for Portuguese and Italian deals, it is no surprise to

find that peripheral spreads are marginally tighter today. Another notable

development was that the Greek 3m bill auction dropped below 1%!