EGBs have traded in a risk-on tone......>

EGB SUMMARY: EGBs have traded in a risk-on tone Tuesday, as markets await final

confirmation of Italy's next government and Prime Minister. 

- Periphery debt has clawed back some losses from the previous Italy-led

sell-off, but the recovery appears to have stalled as the day has gone on. 10Yr

BTP/Bund spread down 12.1bps on the day at 174.5bps, but off low of 171.2bps.

- Spain and Portugal have seen sharp recoveries too, but again, the rally has

faded. Bonos 9.5bps tighter (5 bps higher than today`s low though), PGBs 9.3bps

tighter (up 5.2bps from the low).

- Bunds fell sharply to open the session but have steadied, with the 10Yr yield

rising 3.1bps to 0.564%, just off the high of 0.573%. The curve has steepened

modestly with Schatz motionless, 2s10s up 2.5bps to 116.5bps (10s30s flat).

- All the action in the Euribor strip has been at the long end, with Blues off

2.0-2.5 ticks, and the White end basically going nowhere.

- Very little in the calendar the rest of Tuesday. Wednesday could throw up some

tests for the relief rally, with a possible Italy PM-designate,

France/Germany/EMU PMIs, and Germany auctioning a new Schatz.