- European government bonds closed sharply higher yesterday tracking treasuries in the US after a series of poor economic data was released in the US. - A rise in jobless claimes, along with a decline in industrial production reduced speculation that the FED will raise interest rates in the near future. - The ECB's Weber siad yesterday that the ECB sees inflation around 2.0% until 2008, noting that short-term price volatility hardly affects the ECB's policy. Weber said that upside inflation risks still remain in the medium-term, reiterating that the ECB will act against 2nd round effects. Weber also reiterated that the ECB will monitor wage increases with vigilance. - With no major economic releases scheduled in the session traders will be watching for any revisions to the final Jan. CPI in Germany, which is due out at 2:00 ET. - Gilts closed sharply higher in the UK after poor retail sales figures were released; gilts extended gains after a series of poor data was released in the US. - A report published by the Industrial Relations Services shows that wage settlements rose by their fastest pace in over eight years in January as workers demanded higher wages in order to compensate fro the rising cost of living. According to the survey wage settlements rose 3.5% in the three months to the end of January. Surveyors said that they expect the pattern of higher pay awards to continue during the first few months of 2007. - With no data due in the UK, gilt traders as well as EGB traders, will be watching Jan PPI data in the US due out at 8:30 ET.