Core EGBs are off day`s lows but........>

EGB SUMMARY: Core EGBs are off day`s lows but remain under pressure, while

Italian BTPs have given up all gains made earlier on budget optimism.

- With US Tsys making major downside moves, Bunds are following suite, with the

Dec 18 Bund future down 84 ticks at 158.09, having traded in a range of

157.74-158.28 today.

- German curve is sharply steeper: 2-Yr yield is up 1.1bps at -0.521%, 5-Yr up

4.2bps at -0.049%, 10-Yr up 5.8bps at 0.533%, 30-Yr up 5.6bps at 1.145%.

- Italian BTPs rallied early on some concessions by the government over the 2019

budget, but have trended weaker throughout the day. The 2-Yr yield is up 1.7bps

at 1.228% (low was 1.121%), 10-Yr is up 4.2bps at 3.355% (low was 3.262%).

- ECB`s Rehn noted Thursday little sign of contagion to Italy so far.

- Indeed, periphery EGBs remain slightly tighter to Bunds, with exception of

Greece, whose 10Yr is 6.3bps wider at 399.5bps. Italy 10s 1.0bps tighter at

282.8bps, Spain in 3.7bps at 102.4bps, Portugal down 5.1bps at 136.8bps.

- Euribor is off weakest levels, though still lower on the day, particularly at

far end of the strip: Blues off 5.5-6.5 ticks (had been off as much as 8.5).