EGBs settled moderately weaker in a.....>

EGB SUMMARY: EGBs settled moderately weaker in a session that saw major

whipsawing action in Italian spreads over political concerns.

- 10Y BTP yields rose as much as 6.9bps before settling 2bps higher at 2.136%.

Initial fears over the 5-Star/Lega economic platform and demands for a debt

writeoff from the ECB were assuaged by news to the contrary. A deal could be

reached as soon as Thursday night but 5-Star sound closer to agreeing than Lega,

which may yet hold out over EU and immigration policy. The story is not over.

- BTP spreads over 10Y Bunds traded in a 14bps range - widened 7.4bps to

158.4bps by midday, but have since fully recovered and are now trading roughly

flat for the day.

- Spread widening was exacerbated by a safe-haven bid on Bunds which reversed.

Jun18 futures now down 27 ticks to 157.91, having been up 21 ticks at one point.

- Rest of the periphery tracked Italy to an extent but ended stronger vs Bunds,

Spain Bonos 1.6bps tighter to 79.0bps and Portugal PGBs 2.7bps to 117.4bps.

- Italian politics notwithstanding, a fairly quiet end to the week Friday on the

data/speaker front, with German PPI/Wholesale inflation data early on (0600GMT).