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, screen selling

in 10-yr US Tsy call options and after surprise rise in Eurozone core inflation.

German 10-year yield is 0.7bp higher at 0.550%, curve touch steeper.

- EMU Periphery are trading strongly though, with Portugal 10-year spread 4bp

tighter, while Spain front-end 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.

- Eurozone flash core inflation for July surprised the market by rising to 1.2%

y/y from 1.1% in June. However overall CPI remained unchanged at 1.3% y/y.

- 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.