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BTP spreads finished sharply wider Wednesday, reversing earlier tightening as the fate of the Draghi gov't was set to be decided after market close.

  • 10Y BTP/Bund spreads hit a high of 218.6bp (up 8+bp on the day) after falling to under 194bp at one point early as it appeared PM Draghi would stay on. The confidence vote is due around 1845CET.
  • Bunds outperformed Gilts through the 5Y segment; but vice-versa further down.
  • The ECB decision will take focus Thursday: markets pulled back 50bp hike pricing slightly as the events in Rome developed, but show about a 60/40% split between 25bp/50bp.

Closing Yields / 10-Yr Periphery EGB Spreads To Germany:

  • Germany: The 2-Yr yield is down 3bps at 0.607%, 5-Yr is down 0.4bps at 1.011%, 10-Yr is down 2bps at 1.257%, and 30-Yr is down 1.5bps at 1.454%.
  • UK: The 2-Yr yield is up 2.8bps at 2.069%, 5-Yr is up 0.9bps at 1.916%, 10-Yr is down 4.1bps at 2.139%, and 30-Yr is down 2.7bps at 2.66%.
  • Italian BTP spread up 8.3bps at 213.4bps / Spanish up 2.3bps at 122.7bps

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