A bit of a risk-on, short-covering.....>

BOND SUMMARY: A bit of a risk-on, short-covering kind of day as European markets

returned from Monday`s holidays, with safe-haven instruments paring gains.

- Italian bonds in what appears to be a relief rally after the dramatic sell-off

of recent days, with the 10Y BTP/Bund spread coming back from an 11-month high

of 189.6bps hit yesterday, last at 173.6bps. 10Y BTPs have rallied 7.5bps today

to 2.31%, while equivalent Bunds are 3.5bps weaker at 0.56%.

- Saw a Bund/BTP future spread blocked at 0856BST, 3,378 IKM8 @ 132.71 vs 2,737

RXM8 @ 158.88, with price action suggesting BTPs were bought vs selling Bunds.

- USTs looking for direction after a small yield uptick;10Y up 0.6bps at 3.07%.

- BoE`s Vlieghe struck a slightly hawkish tone, still looking for 1 or 2 hikes

annually for the coming years. June Gilt futures are off 31 ticks to 121.41,

while the green and blue segments of the Short Sterling strip are off 3-4 ticks.

- JGB futures stuck to a tight range early, before a modest & brief dip lower in

the wake of the latest 20-Year JGB auction, last up 6 ticks at 150.77.

- Another thin data calendar Tuesday, with focus mainly on Italy, though

confirmation of new PM may not happen until Weds or Thurs, says Italian press.