European Bonds are slightly lower on Monday in anticipation of the final details of the U.S. Treasury Department's Public-Private Investment Program.

Treasury Secretary Timothy Geithner has said the program will create subsidies to encourage private sector investments to purchase toxic debt and offset risk, and that it will initially be worth $500 billion, but could be expanded to $1 trillion.

Meanwhile, European Central bank President Jean-Claude Trichet told the Wall Street Journal that he expects a gradual recovery in the euro zone in 2010. He also said the ECB is likely continue to take non-conventional measures through the banking channel.

Also speaking overnight, Bundesbank President Axel Weber said rates in the euro zone are heading down. He also argues central bank has already taken unusual measures beyond lowering rates.

In Germany, returns on two-year German bonds are flat at 1.32%, with five-year yields up 1.7 bps to 2.23%, 10-year yields up 2.3 bps to 3.00% and 30-year yields flat at 3.87%. The Euribor September 09 contract is down 1.5 ticks to 98.62.

Yields on UK two-year bonds are up 1.6 bps to 1.36%, with five-year yields up 4.8 bps to 2.29%, 10-year yields up 5.2 bps to 3.08% and 30-year yields up 2.7 bps to 4.10%. The Short Sterling September 09 contract is down 4.0 ticks to 98.46.

By Erik Kevin Franco, efranco@economicnews.ca, edited by Stephen Huebl, shuebl@economicnews.ca