A risk-on tone at the open Thursday.....>

EGB SUMMARY: A risk-on tone at the open Thursday faded as the day progressed,

with German Bunds paring earlier losses and periphery EGBs getting hit.

- German data on the strong side and hawkish signals from the ECB pushed 10Y

Bund yields up 4bps to 0.341% at one point, but now 0.5bps lower at 0.300%.

- Likewise, French OATs are now on the highs of the day following a rally

beginning mid-morning, with the Sep18 future up 8 ticks at 154.80. The spread

over Bunds widened 1.3bps to 35.0bps at one point, last seen at 34.4bps.

- Italian BTPs dropped sharply shortly after 1400BST, with the short end

particularly hard hit. The curve bear flattened, 2Yr yields up 17bps at 0.849%

and 10s up 6.6bps at 2.720%. 10Y spread over Bunds out 7bps at 242bps.

- There was no apparent fundamental catalyst, though BBG reported heavy selling

in Spanish Bonos as a potential trigger. Spreads widened across the periphery,

with 10s cheaper to Bunds by 3.4bps in Spain and 4.9bps in Portugal.

- Losses in Euribor futures triggered in part by comments by ECB`s Praet on the

inflation outlook have largely reversed. Blue contracts, down as much as 4

ticks, now 0.5-1.0 ticks lower, with Whites now up slightly.