- Despite higher than expected ZEW results in Germany and the Euro-Zone European government bonds closed higher in yesterdayâs session as investors sought the safety of bonds amid market uncertainty spurring from worries that the weakness in the sub-prime mortgage market in the US may spread to other parts of the economy. Note that the 2-Year/10-Year spread closed with a two-point inversion with the yields at 3.92% and 3.90 respectively. - Ahead of the market open in the US yesterday the ECBâs Weber said that a possible drop in inflation will not effect the ECBâs policy. Weber said that current interest rates are not at the appropriate level, noting that current rates are still on the accommodating side. Regarding wage deals Weber said that German wage deals of 4.0% would be too much. Furthermore Weber pointed out oil prices and money supply growth as possible inflation risks. - In focus today will be the release of French CPI for the month of February, as well as Euro-Zone industrial sales for the month of January, due at 3:45 ET and 6:00 ET respectively. Additional focus will fall upon comments from the ECBâs Trichet; Trichet is scheduled to speak in London at 14:00 ET. - Despite the narrowing trade deficit in the UK, Gilts closed higher in the yesterday, in line with the wider markets, as the volatile trade balance data was not enough to weigh gilts down. - The Bank of England sold its first dollar bonds yesterday as part of its FX reserve management program. The BOE sold $2.0B 3-year bonds with a 17bp spread to three-year treasury notes. - In focus today will be the release of the claimant count rate, and jobless claims change for the month of February, as well as average earnings data for the month of January, all of which is due out at 5:30 ET.