A return to risk-off sentiment has.....>

BOND SUMMARY: A return to risk-off sentiment has seen bonds recover from earlier

sell-off with the exception of EMU periphery as Italy political risk comes back

following appointment of Bagnai as Senate finance committee head.

- US, European and UK bonds were all trading slightly under pressure as US/China

rhetoric on trade subsided and markets turned their attention to comments from

heads of central banks made yesterday. Sentiment quickly turned however, on news

that Alberto Bgnai, a Eurosceptic, will be head of finance cmtee.

- German 10-yr Bund yield is 2.4bp lower at 0.352% vs high of 0.393% with the

belly of the yield curve currently outperforming the wings.

- US Tsys have followed German Bunds higher, whipping out last US and overnight

Asian losses. 10-yr yield last 2.9bp lower at 2.909% vs high of 2.948% with 2-yr

seen lagging and in-turn flattening the yield curve slightly.

- UK Gilts have hopped on the back of Bund/Tsy recovery, although move is less

pronounced, weighed by passing of EU Withdrawal Bill yesterday. Less public

sector borrowing in May has not helped. 10-yr Gilt -0.6bp at 1.285%

- Money markets have also reversed losses with blue Euro$/Euribors +2 ticks