There was a strong start for the Bund...>

EGB SUMMARY: There was a strong start for the Bund contract early in the session

and the contract quickly surpassed the high from last Friday. However, the

contract popped its head above the 162.00 level and then began to decline.

Currently, the 10Y yield is showing little net change on the day 0.417%.

- Peripheral debt is under pressure. The Italian 10Y spread to Germany is 3.5bp

wider at 152.7bp and the weakness of Portuguese and Spanish markets are not far

behind.

- Italy sold E2.5bln of a 2Y CTZ into fairly reasonable demand, given the time

of the year but this failed to turn the Italian market around, which sees more

significant supply tomorrow. At 0907GMT, there was a 885 BTP futures block that

looked like a sale.

- Oil price rises have assisted in a decent bid for some short-dated breakevens

in Europe, although the 5Y5Y inflation swap is nearly unchanged.

- There has been no economic data of note.

- Trading is predictably thin.