Good Morning---- USTs found support again y'day from worries in the muni funding mkt with continued concerns about rolling over auction rate preferreds. This gave a bid to the front end. In US TIPS, while we thought a soft retail sales number would bring about selling in TIPS, as it turned out neither a solid retail sales print nor continued strength in energy were enough to save TIPS from the sheer weight of breakeven profit taking. The market quickly turned offered as stocks waned and overseas RM took profits on long held breakeven positions. In Tokyo, USTs reopened higher led by 10yr cash buying from Japanese RM accounts but the mkt caved as Japanese GDP came in better than expected, sending JGBs tumbling and causing the NIK to close up 558. There's been shortening of duration in USTs out of 2s into the 1yr paper and generally the front end has led the mkt lower. EGBs should open lower in line with USTs. MORE supply to take down today, which could cause renewed pressure in the s/t heading into the bidding deadlines. We get Eur 3 bn BTP 4.25% Oct 12s at 10.00GMT and GBP 2 bn 4.50% 2042s at 10.30GMT. As for data, Germanyâs Q4 GDP flash estimate, which is expected to show growth of 0.2% q-o-q (sa), sharply down from 0.7% in Q3 and a little lower than the ¼% rate indicated initially by the statisticians when the preliminary 2007 national accounts were published. They expect French GDP growth to have eased to a mere 0.3% in Q4, down from 0.8% in Q3- BUT skewed to the downside. All-in-all, flash estimate of aggregate euro-area GDP is likely to reveal growth of 0.3% q-o-q (sa), well below the 0.8% rate achieved in Q3. UBS REPORTS before the mkt opens. Bunds to open around 116.18, Bobls at 110.94, Schatz at 104.84. These Quaden comments are clearly being ignored overnight - not sure Asia has seen this yet. Would expect Europe to use this and we see a better bid return across the European curve, especially Euribor .........This particular paragraph appears to have been overlooked >>> ``We are not far from the press conference of chairman Trichet last week so my comments will be very close to the comments of the chairman. During our meeting last week there was no change in the interest rate, but it's true there were two changes: first, we have stressed more than previously the downward, downside risks to growth and second, it was said by Trichet we all were on the same line; there were no longer colleagues asking for a rate increase.''