The Bund contract initially responded...>

EGB SUMMARY: The Bund contract initially responded positively to news that the

German coalition talks had broken down, jumping at the open and then rising to a

high of 163.16 before fading and has now closed the opening gap. The German DAX

has opened 0.4% lower but there is no sense of panic in the market.

- There is little change in the slope of the German curve but the 10Y+ sector of

the curve is leading with a small decline in yields. The Euro initially dropped

from 1.179 down to 1.1725 on the German news.

- Peripheral spreads are stable this morning.

- The FT and Reuters are running the story that PM May is to increase the Brexit

bill offer to help speed along trade talks.

- Germany has released its Oct PPI data at 2.7%Y/Y, exactly in line with

consensus.

- Today, Slovakia is to sell small amounts of 8Y and 20Y debt but this week is

almost devoid of issuance.

- The Bund yield was last at 0.362%, almost unchanged.