Heading in the close the 2Y Schatz......>

EGB SUMMARY: Heading in the close the 2Y Schatz and Bund yields are almost

perfectly unchanged at -0.608% and 0.435% respectively. Ofcourse, there was

volatility around the payroll report as the headline NFP came in soft but the

unrounded average hourly earnings (0.339%M/M) gave some hope that the low

unemployment rate is finally starting to bite. As such, the knee-jerk rally in

Bunds, Treasuries and EURUSD move quickly faded.

- The Eurozone HICP data were also reported on the weak side, with the core

stubbornly refusing to rise from 0.9%Y/Y as service price inflation remained

soft. 

- Soft US non-manufacturing ISM provided only a two cents rally for the Bund,

perhaps because factory orders were decent but overall, the reluctance of bond

markets to rally was a key point of confusion.

- Only the peripheral markets benefitted from a sustained buying flow in the

morning, concentrated at the longer end of the curves. Greek 10Y yields hit

another 12 year low yield of 3.77%, a level that must be tempting to issuing

into.