EGBs started Tuesday on the back foot...>

EGB SUMMARY: EGBs started Tuesday on the back foot following US Treasury

weakness in Asian trading, but have recovered early losses.

- Sep8 German Bund futures opened 13 ticks lower at 163.60, though have

stabilised alongside USTs, down 3 ticks at 163.69.

- Italian BTP yields on Monday afternoon shrugged off the announcement by

Moody's that the agency would extend the review for downgrade on Italy's Baa2

ratings that it initiated on 25 May, but have sold off so far Tuesday morning.

- 2-Yr BTP yields are up 4.1bps at 1.198%, with 10-Yrs up 3.8bps at 3.052%.

- Outside of Italy, periphery spreads are generally steady, with Spanish 10-Yrs

0.8bps wider to Bunds at 109.6bps, Portugal out 0.3bps at 149.5bps, and Greece

tighter by 0.3bps at 402.9bps.

- French yields have opened broadly flat, with the belly of the curve

outperforming with 5-Yr yields down 0.2bps at -0.04%.

- Highlight of the EMU calendar today, given that there is no key data to be

released, is Germany selling new Sep-20 Schatz this morning for E4.0bln at

0930GMT.