Geo-politics dominated all else in......>

EGB SUMMARY: Geo-politics dominated all else in morning european trade and the

10Y Bund contract to 164.64 but hid overbought territory and proceeded to slosh

around close to highs for a while but ultimately traded lower on profit-taking

leading into the US CPI.

- Weak US CPI data caused a temporary spike in prices and the Trump tweets might

also have been expected to push Bunds higher still but the reverse occurred.

Bunds were weighed heavy with longs and investors attempted to get long via

options rather than outright.

- Toward the close, comments by Dallas Fed's Kaplan were interpreted slightly

dovishly and Bunds managed to put in a final sprint higher.

- A notable development in the past couple of days is the change in the Bund

contract option skew that appears to show an increased fear of lower rates.

- Sovereign spreads to Germany were widening strongly early in the day but

managed to claw back a lot of it back when the US CPI data were released. The

bund-BTP ended the day with a smallish 2.4bp widening to 164bp.