It has been mostly downhill for EGBs....>

EGB SUMMARY: It has been mostly downhill for EGBs this morning. Initially, there

was the set up/concern for the 10Y Bund auction this morning but the biggest

decline came after the release of a particularly strong UK labour market report.

Gilt yields are 4-6bp higher across the yield curve and the 10Y Bund looks

strong with only a 1.4bp rise to 0.599%.

- The Bund auction was technically covered with 1.04x the bids for the available

amount for sale. Compared to history of technically uncovered 10Y auctions, this

was a success but clearly was not a good auction. As such, the market traded

slightly lower on the result.

- Flows have been muted. Sources reported early, light German cash market buying

and swap activity has been bullish at the front end but bearish beyond 10Y.

- The market now awaits the FOMC meeting where market strategists are fairly

evenly split between 4 hikes in 2018 within the dots or keeping 3 hikes. 

- For a change, there has been minimal movement in country spreads amongst EGBs.