Bonds are trading in a decidedly.......>

BOND SUMMARY: Bonds are trading in a decidedly risk-off fashion to begin Friday,

with a flight-to-quality boosting Bunds, USTs and JGBs and Italian spreads

blowing out amid renewed political concerns.

- Amid a contentious ongoing budget meeting in Rome and newswire reports that

the IMF has delayed its economic review of Italy, the BTP curve has flattened

massively as the short end remains under pressure. The 2-Yr yield is up 18.7bps

at 1.16%, though this is well down from 1.38% peak at 0910BST.

- 10-Yrs are up 8.0bps at 3.01%, putting 2s10s at 185bps. Level to watch for

2s10s is the June 25 low at 178.6bps, which was briefly broken (low of 177.11bps

this morning). 10-Yr spread over Bunds out 9.8bps at 255.2bps.

- The Bund curve is bull flattening, with 10-Yr yields outperforming, down

3.1bps at 0.429%. In the US and Japan, the belly is outperforming amid rallying

curves, with 5-Yr JGB yields in 1.9bps at -0.75% and USTs in 1.0bps at 2.845%.

- Since poor UK services PMI data sent them initially higher, Gilts have pared

their rally slightly, Sep8 future up 27 ticks at 122.46.

- Attention firmly on any Italian budget news and US nonfarm payrolls up later.