Relatively dull day in the Bunds today. In the morning we flirted with 3.98% but the price was well supported and was unwilling to test 4%. The afternoon was where most of the action was. The ADP started things off with surprise to the upside +8k(exp -40K) This sent the Bunds and the Treasury's lower. The flatners started to be added across the curve and the Bund poked up to set a new high as Bernanke seemed slightly less positive about the economy. However these gains soon reversed and towards the close of the cash a size seller came in and pushed yields through the 4% level. This pushed the future down to score a new low at 115.04. After a short battle at the low the losses were just as quickly reversed and the Bund traded back to the middle of the profile setting the stage for an almost doji candle. This is typical of a market trying to gauge its short term direction as the key 4% level is tested and defended time and time again. Tomorrow perhaps will set up more directional trade although we will probably have to wait for the ISM non-manufacturing at 3pm for this. The morning however does offer the eurozone pmi services and the Retail Sales for Feb.
At 16:00 the Yields were Euro (2,5,10) 3.57, 3.74, 4.01 and US 1.91, 2.75, 3.59 Most of the movement in both curves occurring at the front as the twos rallied 6 and 14bps respectively to flatten out the curves. The US Curve moving more as Brokers started to suggest that Bernanke's rhetoric was making sub 2% rates look less likey. Euro was at 1.5612 and against Stg 0.7879.