The global tone remains cautious.......>

BOND SUMMARY: The global tone remains cautious following Monday's sharp

reversal, as equities have clawed back early losses but have had an unconvincing

rebound. Not helped by China-US rhetoric ratcheting up this morning (Beijing to

sanction Lockheed Martin on arms sales to Taiwan).

- Safe haven FI has retraced from early highs, Bunds leading the way in the past

hour; Tsys largely trading in ranges. Still, yields lower on the day.

- A fairly busy morning for European data though not particularly impactful:

main highlights are a UK May GDP growth miss vs expectations, German July ZEW

number missing expectations (esp on current conditions), Eurozone May ind. prod.

on the weak side. Looking ahead, U.S. Jun CPI release dominates the calendar.

- Highlights of earnings today: banks (JPM, C, WFC), and Delta Airlines. And

plenty of Fed speakers: Brainard, Bostic, Bullard, and Harker. ** Latest levels:

* Sep US 10-Yr futures (TY) up 2.5/32 at 139-9.5 (L: 139-07.5 / H: 139-13)

* Sep Bund futures (RX) up 23 ticks at 175.86 (L: 175.84 / H: 176.21)

* Sep Gilt futures (G) up 32 ticks at 137.7 (L: 137.59 / H: 137.89)

* Italy / German 10-Yr spread 0.9bps wider at 166.3bps