Not a good day to be long Bunds. The....>

EGB SUMMARY: Not a good day to be long Bunds. The contract opened 10 ticks lower

at 162.67, broke trend support soon after at 162.46 and then rolled downhill

throughout the remainder of the session to below 162.0.

- There was no respite and while the initial EGB weakness could be blamed upon

risk-on movements, the risk-on move was not behind the weakness later in the

session as equity markets went sideways. 

- Technical selling gained momentum. A strong UK inflation print and heavy

supply was clearly weighing even though the 5Y and 100Y Austrian deal appeared

to go very well they ultimately printed much more than expected at E4bln 5Y and

E3.5bln in the long tenor. Dutch and EFSF issuance went well but the poor 30Y

Bundei 2046 auction was unhelpful given the 10Y Bund auction tomorrow.

- In the afternoon, Gilts were the epicentre of weakness as a BoE reverse

auction was heavily offered and the BoE picked up very cheap paper.

- Spain started the day poorly but came back gradually and while the Bund yield

rose 5.3bp to 0.39%, the Bonos 10Y was only 2.8bp higher.