A risk-on theme prevailing so far......>

BOND SUMMARY: A risk-on theme prevailing so far Thursday, with US Tsy and German

bund yields up to two-week highs and Eurozone periphery spreads narrowing, amid

anticipation of next week`s ECB and Fed decisions.

- Italian 10Y BTP/Bund spreads down 11.2bps to 235.7bps after the Conte

government won the confidence vote last night, and risk-taking has returned.

- Even so, some eurozone `armageddon` trades seen this morning, with 33k Bund

Sep 168.5/171 call spreads bought. Market sources says that for this trade to

reach full potential, the Bund yield would need to drop around 77bps from

current levels (0.509%, up 4.3bps today) before the option expires on Aug 24.

- US 10YTsy yields are up 1.7bps at 2.988%, with the curve bear steepening as 2s

up just 0.4bps. The 2s10s curve is quietly rising, up nearly 6bps from the

40.5bps cyclical low set on May 31.

- Solid bond auctions in France and Spain this a.m., with good cover ratios.

Spanish 10Ys rallied 4bps post-auction, now 7.9bps lower today at 1.423%.

- JGBs flat, with the June futures contract off one tick at 150.82.

- Rates futures weaker across the board, with notable Euribor bear steepening.