North Korean events created a spike.....>

EGB SUMMARY: North Korean events created a spike in Treasury prices overnight

and Bunds opened higher but it took around an hour before the full-fat, risk-off

movement in global markets was in full-swing.

- Markets are thin and the initial movement was futures-led, with more two-way

flow in the 10Y Bund cash benchmark.

- Late morning saw news of another terror attack in a Parisien suburb in which 6

soldiers were injured, although the market has unfortunately become quite immune

to such news.

- The rise in the Bund contract petered out at 163.79 at about 15 minutes before

the 5Y Obl auction cut-off. The set up for the auction was far from ideal and

was very poorly bid, pushing the German markets down further. Just over E3bln in

bids were seen for the E4bln available for sale and was the worst bid-cover

ratio in an Obl since July last year. 

- Despite the risk-off trading environment, peripheral spreads held in fairly

well. The Italian BTP market widened 3.9bp to Germany and was the poorest in the

periphery.