Rising geo-political tensions...........>

EGB SUMMARY: Rising geo-political tensions emanating from North Korea is driving

EGBs higher this morning. The Bund contract opened up a handful of ticks higher

but has not looked back since. 

- As the EURUSD broke above the 1.20 barrier for the first time since January

2015 and almost at the same time European stockmarkets opened much lower so,

Bunds rallied quickly. Currently, the 10Y Bund yield is 3.5bp lower on the

session at 0.342%, its smallest yield since Jun-26.

- Within this risk-off world, the Bund-peripheral spreads are widening and the

Bund-BTP is 4.5bp more generous at 175bp.

- The German DAX is down 0.8%, gold has rallied to its best level since last

November and the yen is at its strongest since April. The 10Y JGB yield came

very, very close to touching 0% this morning.

- Economic data have been good. French consumer spending has been driving the

Eurozone recovery and Jul consumer spending data increased by 0.7%M/M (in line

with consensus).

- Germany will sell E5bln of a new 2Y Schatz later on this morning.