EGBs have had a fairly volatile start...>

EGB SUMMARY: EGBs have had a fairly volatile start to the week, with the caveat

that the UK holiday has left trading flows fairly subdued. 

- Italian bonds have had a volatile day, opening the week with a sharp drop on

political concerns (EU tensions), then rallying, then falling back to new lows

as hopes of Chinese purchases of Italian debt were dashed by Fin Min Tria. The

Sep8 BTP future traded in a 78 tick range (lo: 123.04, hi: 123.82), last trading

closer to the lows, at 123.19.

- Sep8 Bund futures are set for their biggest daily drop of August, off 46 ticks

at 162.63, in part due to stronger-than-expected German IFO data this morning.

- This has left periphery spreads narrower to Bunds despite their yields selling

off. 10-Yrs vs Bunds are in 2.5bps for Italy to 278.3bps, 1.5bps for Spain at

103.5bps, 2.1bps for Portugal at 145.8bps, and 2.9bps for Greece at 382.8bps.

- Euribor futures a little weaker, Green and Blue contracts off 1.5-2.0 ticks.

- A bit more data Tuesday with ECB money supply and French and Italian

confidence figures, but unlikely to have much impact. Italy sell CTZ Tuesday and

medium/long-term bonds on Thursday.