A return towards risk-on sentiment......>

EGB SUMMARY: A return towards risk-on sentiment combined with a slight oil

bounce and signs of Rome blinking first in the standoff with Brussels has seen

periphery EGBs rally and core EGBs sell off.

- Italy has been the been the day`s big gainer, the BTP Dec-18 contract 172

ticks up at 124.06, the bulk of which came at the open after reports emerged

that the government would reconsider its budget targets.

- The 10-yr spread Vs Bunds has closed 18.8bps to 287.9bps.

- The Dec-18 Bund future is down 37 ticks at 160.72. The short end of the curve

has outperformed with 2s10s bear steepening 1.1bps.

- Greek bonds are today's other big winner, the GGB Dec-18 contract up 119 ticks

at 95.382. Elsewhere 10-yr v Bund spreads have fallen, Spanish bonds tighter by

8.8bps at 120.4bps whilst the Portuguese spread has fallen 7.5bps to 152.7bps.

- Euribor futures are a little lower, off 0.5-1.5 ticks across the strip.

- ECB`s Draghi today basically toed the usual line on policy, but sounded a

slightly cautionary note on the Eurozone growth outlook.

- ECB speakers later today/tomorrow include Mersch, Rehn, Coeure, Praet.