In thin trading, core EGBs are..........>

EGB SUMMARY: In thin trading, core EGBs are slightly off their lows but remain

under pressure amid strong German data and a risk-on tone.

- Bund Sep futures are off 18 ticks at 162.91, hitting a low of 162.76 earlier

after August IFO came in at 103.8 vs expectations of 101.8. German curve is bear

steepening, 2-Yr yields up 1.0bps at -0.585% and 10-Yrs up 1.4bps at 0.358%.

- Italian BTPs opened weaker on EU-Italy tensions, then rallied, but have pared

those gains, with the 2-Yr trading in a range of 1.184%-1.275%, last at 1.228%.

- Periphery spreads have narrowed modestly, after yields widened significantly

earlier. BTPs/Bunds in 0.3-0.4bps Spanish and Portuguese 10-Yr spreads are in

slightly as well, between 0.1-0.4bps.

- Supply potentially weighing on Bunds as well, with the calendar picking up

this week with Italy going to market twice, Germany selling E3bln in Bobl, and

news this morning of Finland syndicating a 10-Yr benchmark EUR issue.

- Minimal data today puts focus on potential global events: NAFTA negotiations

in particular. Later in the week, flash CPI readings for August and Italy

ratings review by Fitch on Friday could be flashpoints.