Very high volume day for EGBs and.......>

EGB SUMMARY: Very high volume day for EGBs and futures. Heavy T-note future

selling in Asian time led to a drop in EGB prices at the open. Fears of a heavy

supply schedule amplified the move. Yet, the deals were universally strong. 

- EFSF 7Y, 10Y Portugal and 20Y BTP syndications all did well and perhaps this

demand encouraged the EIB to announce a a 2048 issue in the near future.

- Aside from the supply, the other story was how the Chinese will slow or stop

purchases of US Treasuries. This news was also greeted by a dip in the EGB

market although nearly all these losses were clawed back.

- Two minutes after the Chinese news hit was the cut-off for the Bund auction.

Perhaps because of the market volatility, the new Bund had a technically

uncovered auction, with only 4bln of bids for the E5bln for sale. 

- Going into the European close, the 10Y Bund 0.5% Aug-27 yield is 0.5bp higher

at 0.469%. Italian spreads to German were static but news that Catalan

separatists have reached an accord to return Puigdemont to his former position

helped Bund-Bonos spreads widen, mainly from the 3-7Y sector.