News of a successful test of a North....>

EGB SUMMARY: News of a successful test of a North Korean hydrogen bomb is

dominating trading this morning but given the long-running nature of the threat,

market reactions are muted. Yonhap news agency also reports that North Korea is

readying a ballistic missile launch.

- The 10Y Bund yield has dropped by around 1bp today and indeed, the entire

German curve is lower by approximately the same amount.

- As trading got underway in Asia, US Treasury futures initially spiked to

126-30 from 126-19 before fading slightly. The Labor Day holiday has kept

volumes low in Treasury futures but eurodollar volumes have been impressive.

- The DAX index has dropped 0.6% at the open and the yen has strengthened from

around 110.2 to 109.5, Gold is firm. In the past few weeks, the euro benefited

from North Korean threats but this is not the case today.

- On Friday, Moody's changed their outlook on Portugal's Ba1 rating to positive

from stable, which appears to have prevented Portuguese debt from the slight

widening to Germany that other peripheral markets suffer from.

- There is only bill supply today and no significant data release.