The Bund contract started lower and.....>

EGB SUMMARY: The Bund contract started lower and had a look at closing the gap

at 164.98 but did not manage to do so. About an hour into European trading, the

Bund recovery began.

- The upward Bund move began despite some robust data. German State and Spanish

CPI data were approximately in line with consensus but Eurozone economic

sentiment data easily beat expectations, and achieved a 10 year peak of 111.9.

-  Despite the recovery of the Bund contract, the 10Y Bund yield is still 1bp

higher than the European close from yesterday at 0.353%.

- Spanish debt is underwater today; the 10Y spread to Germany is 1.4bp wider as

the market was reminded of the Catalan secession referendum by a DBRS report on

the topic.

- Italian debt also suffered from poor 5Y & 10Y BTP alongside CCTeu auctions. We

had read many reports about strong Italian month-ends and good

redemptions/coupons so the poor result weighed badly. 

- The new 10Y Finnish deal appears to be going extremely well with a large book

and tightening spread.