Majority of Bonds are trading..........>

BOND SUMMARY: Majority of Bonds are trading modestly lower Tuesday, weighed by

bond supply and no near-term challenge to UK PM May as political turmoil

subsides a little. But bounce off lows in wake of weak German ZEW sentiment.

- German 10-yr Bund yield is 1.7bp higher at 0.317% with yield curve slightly

steeper as short-end lags leading to the 2s/10s curve to widen by 1bps. Dutch

10-yr & 10-yr and 25-yr supply from the EFSF today and a new 10-yr Bund tomorrow

all seen weighing. Although very weak German ZEW sentiment knocks yields off

intra-day highs.

- EMU periphery bonds are fairing better, inching higher, despite BTP supply

later in the week. 10-yr Bund/BTP spread is 1.1bp tighter at 235.5bps.

- US Tsys are also lower with yields between 0.2 to 0.7bp higher across the

strip, weighed by move lower in Bunds but mixed data sees a partial recovery.

- Gilts also bouncing off intra-day lows, underpinned by mixed data (inline GDP,

better services/trade balance, but weak IP) 10-yr is +1.5bp at 1.291%.

- The Short Sterling strip is 1 to 2 ticks lower curve touch steeper. Euribor

and Eurodollar off 0.5-1 ticks in reds, Greens and Blues.