In Germany, the bund was up 60.0 ticks to 110.57 with yields down 6.9 bps to 4.59% while the 10-year gilt was up 25.0 ticks to 105.70 with yields down 2.7 bps to 5.02%.

According to Germany's Ifo Institute for Economic Research, the business climate indicator for Germany fell to 97.5 in July, down from both the 100.1 level expected and the 101.2 figure recorded in the previous month. June's reading was revised down from an initial figure of 101.3. Looking at the sub-components of the indicator, the current assessment slid down to 105.7 from 108.3. Economists had expected a more moderate fall to 106.5 for the month.

At the same time, the expectations component declined to 90.0 against forecasts of a 93.2 print for July. The previous month had recorded an expectations level of 94.6, revised down from 94.7 previously released.

"The firms are much more dissatisfied with their current business situation and they are clearly more reserved regarding the six-month outlook," Ifo President Hans-Werner Sinn said in a pres release. "These results suggest that the economic upswing is coming to an end."

The Office for National Statistics (ONS) also reported that retail sales in UK declined by a record 3.9% in June on a monthly basis, down from both the 2.6% decline forecast and the 3.6% increase recorded in the previous month. May's retail sales figure was revised down from a previous growth rate of 3.5%.

In annualized terms, retail sales gained only 2.2% for the month. Economists had expected a growth rate of 4.4% in July following the 7.9% increase seen in May, revised down from 8.1%.

The five-year Bobl was up 51.5 ticks to 106.12, the two-year Schatz was up 24.0 ticks to 102.57 and the June 2008 Euribor contract was trading up 3.0 ticks to 94.98.

The spread between the 10-year Bund and 10-year U.S. Treasury notes widened 3.047 bps to -49.40.

UK 30-year bond yields were up 0.5 bps to 4.65%, five-year bond yields were down 7.9 bps to 4.98% while yields on the two-year bond were down 9.8 bps to 5.00%.

The September 2008 Short Sterling contract was up 4.5 ticks to 94.12.

Yields on U.S. 10-year Treasury notes were down 1.8 bps to 4.099%.

European stock markets were declining with the Eurostoxx down 18.53 points to 2872.15, the UK FTSE 100 down 45.70 points to 5404.199 and the German DAX down 72.74 points to 6463.35.

The Japanese Nikkei was trading up 290.38 points to 13603.31.

The Canadian dollar was up 0.07 cents to 0.9905 against the USD (1.0096 USD/CAD). Against the euro, the loonie was up 0.18 cents to 0.6323 (1.5816 CAD/EUR).

The U.S. dollar was down 0.08 to 107.82 and the euro was down 0.45 to 168.91, both against the yen.

The euro was down 0.33 cents to 1.5666 while the pound sterling was down 1.43 cents to 1.9854, both against the USD.

The euro was up 0.41 cents to 0.7891 pounds.

The Swiss franc was down 0.03 cents to 1.0379 against the USD and up 0.28 cents to 1.6262 against the euro.

All data were taken at 7:34 a.m. EDT.

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