Tuesday saw BofAML note that "following a.....>

BUNDS: Tuesday saw BofAML note that "following a month of increased trade

uncertainty, last week was dominated by central banks' reactions. We had dovish

reactions from the Fed, the BoE, as well as finally the ECB. After a

disappointing reaction to the June ECB meeting (breakevens lower, curve flatter

and EUR stronger), Mr Draghi tried to change the narrative at the ECB's

symposium in Sintra. He argued that the ECB would be forced into action not by

the materialization of negative contingencies, but by the absence of improvement

in the data flow. Specifically, the ECB has put all options on the table:

enhanced forward guidance, rate cuts and asset purchases. All three are

supportive of rates markets. Our economists now expect tweaks to forward

guidance in Jul followed by rate cuts in Sep. We reached and broke through our

-25bp Bund yield targets from a month ago. We now expect Bund yields to trade as

low as -40bp with flattening pressure on the curve. The search for yield,

increased likelihood of QE being priced, and extended forward guidance - we

believe - will outweigh any short-term mechanical curve steepening in response

to rate cuts."