EGBs were buffeted today by a...........>

EGB SUMMARY: EGBs were buffeted today by a will-they-won't-they series of

political headlines out of Italy over whether 5-Star would seek to form a

government with the League, and whether former PM Berlusconi could play a role.

- The 10-year BTP/Bund spread told the story, falling 4.5bps early on to

125.9bps, before rocketing to a high of 133.4bps on politics. Last trading just

off the day's high at 132.2bps. 5-Star and League have 24 hours to form a

coalition, so headlines likely to continue to drive the spread Thursday. 

- In contrast, Spain and Portugal traded about 2bps tighter to Bunds, with

Portugal boosted by a decent auction this morning.

- A safe-haven bid emerged as the day went on, in contrast to Tues/Weds morning

where it seemingly failed to materialise. The Jun18 Bund future recovered from a

low of 158.52 to rise 36 ticks to 158.88, ending basically flat.

- Early steepening in Bunds and EMU rate futures eased as the long end came back

in. German 2s-10s rose by 1.6bps intraday before falling back to 113.6bps, up

just 0.1bps. Euribor blues recovered one tick to finish 1.5 ticks down, while

whites and reds were down half a tick.