Risk-off flows, Brexit uncertainty......>

EGB SUMMARY: Risk-off flows, Brexit uncertainty and soft US unit labor costs all

helped push German Bunds higher and yield curve flatter Wednesday. German 10-yr

Bund is looking to close 2.3bp lower at 0.297% after hitting lowest level since

Jun 27. German 2s/30s is 0.8bp flatter

- Bunds rallied from session lows to intra-day high in European afternoon trade,

supported by concerns over agreement on Brexit talks moving onto the next stage,

US unit labor costs falling 0.2% in Q3 and general risk-off flows.

- EMU periphery extended widening move versus German Bund, led by the +3bp move

in Bund/Bonos 10-yr spread. Semi-core are also marginally wider vs German Bund.

Weakens could be linked to slightly hawkish comments from ECB Mersch who warned

of risk if the ECB's asset purchase programme remained in place for too long and

expressed confidence that the apparent decoupling between growth and inflation

won't persist and inflation will, therefore, pick up.

- Late on there was a Bund/BTP future spread that was blocked and appeared to

look for BTP/Bund spread to narrow.

- Tomorrow Spain & France look to sell up to E9bln in Bonos and OATs