European Government bonds have opened..........>

EGBS: European Government bonds have opened Thursday with a slight bid taking

cue from from rally in US Treasuries seen after Europe closed Wednesday and

following no upward surprises in Spain and German region of Saxony flash

inflation data. German 10-yr yield last 0.7bp lower at 0.315% with yield curve

marginally flatter as short-end remains anchored.

- The other focus today will be Italy CCTeu, 5-yr and 10-yr BTPO auctions for up

to E6.5bln and the start of the EU summit with the main focus being on

immigration policy, completion of the banking union and position of EU in

current trade dispute with the US.

- Spain flash HICP came inline with expectations rising to 2.3% y/y from 2.1%

y/y. While German region of Saxony CPI came in at 2.1% for June, down rom May's

2.2% and also below MNI pan-German median forecast of 2.2% y/y.

- EMU periphery are also marginally bid, but lagging the move higher in core

bonds, but so far spreads are behaving reasonably well. 10-yr Bund/BTP spread is

0.2bp wider at 249bps.