EGBs pared some gains shortly before....>

EGB SUMMARY: EGBs pared some gains shortly before US Fed Chair Powell`s monetary

policy report to Congress which began at 1500BST, but remain higher on the day,

with Italy impressing in particular.

- The low-volatility, low-volume summer trading environment has continued to

boost EGB peripheries, both outright and versus lower-yielding Bunds.

- Sep8 Bund future is up 31 ticks at 162.77, down slightly from the 162.89 high.

- Italian BTPs rallied strongly, with the 2-Yr yield down 8.6bps at 0.565% and

the 10-Yr down 11.2bps at 2.465%. The latter is the lowest since May 28.

- Spreads for those respective BTPs over Bunds are down 8.5bps and 9.9bps. Both

spreads are close to two-month lows (2-Yr at 118.8bps vs June low of 111.0bps,

10-Yr at 211.2bps vs June low of 210.8bps).

- Italy easily outperformed Spain and Portugal, whose 10-Yr spreads to Bunds

fell by 1.4bps and 3.3bps, respectively.

- Euribor futures have moved relatively little in comparison to bonds. Blue

contracts have picked up by 1.5 ticks, with the short end remaining anchored.

- Quiet EMU data calendar Wednesday; German 30-year auction in the morning.