The German Sep Bund future contract.....>

EGB SUMMARY: The German Sep Bund future contract opened higher, but quickly gave

up those gains as German retail sales rose higher than expected and is trading

modestly lower following screen selling in 10-yr US Tsy call options. German

10-year yield is 0.6bp higher at 0.548%.

- EMU Periphery are starting strongly though, with Portugal 10-year spread 5bp

tighter, while Spain 5-year Bonos and the long-end of the Italian curve are the

stand out performers so far Monday. Support seen due to large cash flows from

both Spain and Italy today and tomorrow, totalling E51.3bln in redemption and

coupon payments.

- Markets attention is now turning firmly onto Eurozone flash inflation data at

0900GMT. MNI median forecast is for both the main headline and core CPI numbers

to come in unchanged at 1.3% y/y and 1.1% y/y respectively.

- It is also month-end today with Barclays projecting a large 0.12yr increase

for the eurozone, which should be seen supporting bid in EGBs as well.

- No Eurozone supply today, but Germany will start things off on Tuesday before

a raft of issuance on Thursday from Spain and France.