Curve flattening is the order of the...>

BOND SUMMARY: Curve flattening is the order of the day. Setting the tone is US

Tsy 2s-10s, which is now at the flattest level (41.3bps, down 1.5bps today)

since 2007, with the 10-yr yield down 1.5bps at 2.9476% and 2-yr unchanged.

- Bund curve has flattened as well, with 10s 3bps tighter to 2s. Jun18 Bund

future a couple of ticks higher at 159.09. Euribor futures largely unchanged

across the curve, some buying seen at short end.

- Solid Italian BTP auction this morning maintained the positive risk tone,

alongside news that a 5-Star-League coalition may form as soon as next week, and

conciliatory comments from 5S lawmaker on policy. 10-Yr spreads over Bunds have

come down from a high of 139bps Thursday to 134.8bps.

- Comments from ECB`s Draghi in Florence at 1415BST the main highlight on the

European calendar today.

- Gilts now off slightly after bigger sell-off earlier, weighed by expectations

BoE will hike by end-year, with Jun18 future up from 122.15 low this morning.

- JGB futures have traded in lacklustre fashion, operating in an extremely tight

range and last deal 6 ticks higher at 150.85.