The Bund contract is trading close to...>

EGB SUMMARY: The Bund contract is trading close to the highs of the day and

clearly responding to rising geo-political tensions.

- There was much debate upon whether the US-North Korean situation was seriously

dangerous or whether this was merely posturing but the general opinion was that

with implied and realised volatility so low, the easy play was to take off some

risk. 

- Movements in markets did not correlate closely with the timing of the news.

Block trades in futures were sporadically appearing and having quite significant

impact upon prices. 

- Germany was unfortunate to have to issue into a bullish market and the E4bln

5Y auction was technically uncovered. The Obl being sold weakened in the lee of

the auction but the Bund contract seemed to absorb the shock.

- One 5099 IK vs 5405 OAT trade sent the Bund-BTP spread 3bp wider in a matter

of second and took some time before investors were brave enough to value hunt. 

- BTPs were weak through the day and by the close of play, the 10Y Bund-BTP

spread was 5bp wider at 158.3bp.