European government bond trading........>

EGB SUMMARY: European government bond trading Monday has been very lacklustre

due to May-Day holiday in the UK with volumes way below avg. What trading there

has been has mainly been buying in the long-end end of the curve with EGBs

squeezing higher throughout the morning, supported by surprise fall in German

factory orders for March.

- German 10-yr bund yield is 0.1bp lower at 0.535% with 2s/10s 0.8bp flatter and

10s/30s 0.2bp wider.

- German factory orders surprised to the downside, contracting 0.9% m/m versus

consensus for a expansion of 0.5% m/m and adds to downward revision to German

service PMI on Friday

- EMU periphery has pared earlier tightening move as slight positive noises from

Italy political situation fades with 10-yr Bund/BTP spread now unch at 125.1bps

vs low of 123.8bps

- There has been very little movement in Euribors as well with volume very thin,

with contracts steady to 0.5 tick higher across the strip.

- Little afternoon data, however comments from ECB Praet will be eyed.