Budget day in Italy has begun with......>

EGB SUMMARY: Budget day in Italy has begun with new concerns about a renewed

dispute over the final plan, sinking BTPs and pushing Bunds higher.

- Various news sources have reported a last-minute rift that could delay the

eagerly awaited coalition agreement over the 2019 Italian Budget today.

Lega/5-Star have apparently agreed on a higher budget deficit, while Sole

reported that Fin Min Tria threatened to resign.

- The Dec 18 BTP future is down 93 ticks at 126.09.

- This is hitting periphery EGBs more broadly; the spread of 10-Yr Italian BTPs

vs Bunds is up 9.9bps at 243.2bps; Spain is out 2.7bps at 102.4bps; Portugal out

2.8bps at 139.9bps; Greece out 4.5bps at 356.2bps.

- German bonds rallied, with the curve flattening, 2-Yr yield down 1.3bps at

-0.513%, 5-Yr is down 2.6bps at -0.068%, 10-Yr down 3.3bps at 0.493%. Dec 18

Bund future is up 53 ticks at 158.57.

- Above-consensus Saxony Sep CPI has failed to make a lasting dent on Bunds.

- Interestingly, we get some supply from Italy later, selling CCTEu and BTPs

including 10-Yr benchmark Dec 28.