German Bunds are holding onto modest....>

EGB SUMMARY: German Bunds are holding onto modest risk-off gains, having slipped

from session highs following technically uncovered German 10-yr re-opening

auction and slightly hawkish comments from ECB Mersch. German 10-yr Bund is

0.9bp lower at 0.311%.

- Germany received only only E1.83bln of bids with E2bln on offer at the 10-yr

auction despite yields being higher than last time it was tapped.

- ECB Mersch warned of risk if the ECB's asset purchase programme remained in

place for too long and expressed confidence that the apparent decoupling between

growth and inflation won't persist and inflation will, therefore, pick up.

- EMU periphery pared earlier tightening move vs Bunds with Spain currently

1.8bp wider, although there is a Bonos auction tomorrow which is seen weighing

sentiment. France is also wider by 0.8bps ahead if its Long-term OAT auction

tomorrow.

- There has been some decent flows in swaps with paying in the belly seen on

10Y-12Y-15Y and 10Y-11Y-12Y swap flies.

- Data wise saw only German manufacturing orders rise 0.5% m/m adding.