Continued signs of strain between.......>

EGB SUMMARY: Continued signs of strain between Rome and Brussels mean Italian

yields have risen sharply Monday morning, though are slightly off highs.

- The continued standoff between Italy and the E.U. has kept pressure on BTPs,

with the Dec18 future off 145 ticks at 119.66 (low of 118.94).

- The 2-Yr BTP yield is up 19bps at 1.542% (spread vs Germany up 21bps at

208bps, highest since June), 10-Yr up 14.7bps at 3.571% (out 19bps vs Bunds at

304bps, highest since 2013).

- Bunds have benefited from related risk aversion, Dec 18 future up 54 ticks at

158.15, just off high of 158.23 Monday. The German 2-Yr yield is down 2.7bps at

-0.541%, 10-Yr down 4.5bps at 0.528%.

- Some bull flattening on the Euribor strip, Greens and Blues off 2.0-2.5 ticks.

- French OATs are a little stronger but haven't matched the German rally, with

10-Yr spread over bunds 1.5bps wider at just under 35bps.

- Greece has paralleled Italian weakness today, 10-Yr spread vs Bund up nearly

17bps at 410bps.

- Reminder that it is a U.S., Canadian, and Japanese holiday today.