EGBs are softening in early trade on....>

EGB SUMMARY: EGBs are softening in early trade on Tuesday but the problems are

mostly concentrated in the front end of the dollar curve. Admittedly, the US was

closed yesterday but the 4.6bp rise in the 2Y yield and more in the belly of the

curve is more than a 'catch-up'.

- Later today, the US Treasury begins a mammoth $258bln of supply that will be

spread over the coming 3 days that will include bills, Treasury-FRN and 2/5/7Y

coupons.

- Spain has started marketing its 30Y benchmark with guidance at MS+109bp area.

- German PPI grew 2.1%Y/Y in January, slightly firmer than expectations of

1.8%Y/Y.

- Peripheral spreads to Europe are stable this morning; indeed the 30Y sector of

Spain is slightly outperforming the equivalent in Germany.

- European contract rolling has been limited, so far, but should now accelerate

quickly.

- Highlights today include the ZEW survey at 1000GMT and the 2Y Schatz auction

30 minutes later.