EGBs took a turn for the worse..........>

EGB SUMMARY: EGBs took a turn for the worse shortly after the US crossover, with

strong upward revisions to past months` US retail sales data and thin volumes

combining to send bonds lower.

- Bund futures appeared to be levelling out in early afternoon after early

losses, but fell sharply beginning around 1400BST, tracking US Tsys lower. The

Sep8 future dropped 35 ticks to a low of 162.50, last trading at 162.53.

- The German curve bear steepened, with 2s10s up 2.0bps to 98.3bps. 2-year

yields remained fairly well-anchored though (up less than 1bps) ahead of

Tuesday`s Schatz auction.

- Periphery yields are up but spreads are broadly tighter, with Portugal

underperforming as the 10-year PGB has widened 1.6bps vs Bunds to 141.1bps.

- Italian 2-year BTPs have rallied 2.9bps to 0.658%, and while 10-year yields

rose 2.8bps to 2.579%, it is notable that both instruments are testing the lower

end of the trading yield range they have been in since the late May sell-off.

- The Euribor futures curve has bear steepened, with Blue contracts off 2.0-3.0

ticks and the short-end down just 0.5-1.0 ticks.