German Bunds have opened modestly.......>

EGB SUMMARY: German Bunds have opened modestly lower, seen weighed by slight

weakness seen in US Treasuries overnight and following drop in German ILO

unemployment rate to 3.7% from 3.8%. While French flash inflation came just

above MNI median forecast of 0.9% y/y at 1.0% y/y. German 10-year yield is 1.3bp

higher at 0.372%.

- What appeared like paying in 4Y, 5Y and 6Y Euro swaps also weighed on the core

EGB market.

- European periphery are trading better then their core counterparts with a mild

risk-on tone seen in the markets. Both 10-year Spain and Italy are around 1bp

tighter vs Germany.

- Markets attention now seen turning to key Eurozone flash inflation data at

0900GMT. Markets are seeing a slight upside risk to consensus forecast for a

1.4% y/y outturn, following higher German and Spain HICP yesterday.

- Issuance has been completed this week, but is expected to pick up sharply next

week with Austria, Germany, France and Spain all scheduled to come to markets.