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EGBs-GILTS: Core Stronger On Italy Risk, Mixed PMIs

BOND SUMMARY

Reports of potential early Italian elections and mixed flash Jan PMIs so far have taken a toll on risk appetite, with periphery EGB spreads widening and core FI stronger.

  • Correiere della Sera reported this morning that PM Conte could seek early elections. 10Y BTPs widened beyond 120bps to Bunds (earlier hit widest since November, 124.5bps).
  • German PMI data in line for manufacturing and a bit better for services (helping Bunds come off session highs), but earlier both French manuf and svcs missed expectations by about 2 points.
  • EZ PMI at 0900ET, UK at 0930ET. Earlier, UK retail sales disappointed, but not much market reaction.

Latest levels:

  • Mar Bund futures (RX) up 17 ticks at 176.97 (L: 176.63 / H: 177.14)
  • Mar Gilt futures (G) up 7 ticks at 134.04 (L: 133.99 / H: 134.19)
  • Mar BTP futures (IK) down 18 ticks at 150.13 (L: 149.73 / H: 150.27)
  • Italy / German 10-Yr spread 3.6bps wider at 121.8bps

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