Government bonds have traded weaker....>

BOND SUMMARY: Government bonds have traded weaker across the board with this

morning's supply being a contributing factor for gilts, bunds and BTPs.

- The gilt curve has marginally bear steepened with the 2s10s spread up 1bp.

- Bund yields are 1-2bp lower on the day. It is a similar story for OATs.

- BTPs have underperformed with cash yields 4-6bp lower on the day and spreads

over bunds widening.

- Supply this morning came from the UK (Gilts, GBP4.75bn), Germany (Bobl,

EUR3.4bn) and Greece (bills, E1.3bn). Italy is syndicating a 10-year BTP today

with the book size north of EUR100bn.

- There was little impact from this morning's PMI data with the final Eurozone

composite and services prints for May slightly above expectations and still

pointing to a contraction in activity.

- Focus shifts to the ECB tomorrow. There is broad consensus among the sell-side

that the GC will opt for a EUR500bn increase in the PEPP. A EUR250bn, or no

increase at all, would be a hawkish surprise.