The final day of August was a fairly....>

EGB SUMMARY: The final day of August was a fairly quiet affair for EGBs. A risk

off-movement in financial markets cut the price of the Bund contract at the

open. 

- During the morning session, Eurozone HICP data came in above the screen

consensus at 1.5%Y/Y, although the impact upon prices was limited by the upward

surprise to German CPI released yesterday.

- After a morning of mostly trading sideways, a Reuters source article claimed

that the ECB might delay the QE taper because of the strong euro, which gave a

small nudge higher to Bunds but had a very large impact upon peripheral debt.

Most Bund-peripheral spread tightening on the day can be traced to that moment.

- As lunchtime approached, EGBs started a small move higher as hopes for

month-end extensions grew. However, these were expected to be small in Europe,

much larger in the US.

- As the close approached the German 2-30Y yield curve had moved 0.2-0.5bp lower

in yield. Italy was the best performing peripheral market with a 2bp tightening

to 168bp. French debt did surprisingly well as new Labour Reforms were unveiled.