European bond markets have been roiled by......>

EGBS: European bond markets have been roiled by Italian political news this

morning which has led to a small bout of flight-to-quality buying that initially

saw 10-yr Bund/BTP spread widening by 8.7bps to 139.7bps.

- There was also large buying seen in German 2-yr Schatz futures with around

120k contracts seen traded within 1-hour. Sources reported sellers of the 2-yr

BTP future (BTPSM8) vs buying the 2-yr Schatz future (DUM8)

- Sources highlight news that M5S Di Maio and League's Salvini might share the

Premiership and reports that the idea of getting the ECB to write-off E250bln of

Italian debt is still being discussed by the 2 parties and rehash of Euro exit

fears added market concerns. 

- Bund/BTP spread though has faded from earlier highs as newswire reports that

euro exit procedures are no longer being discussed. 

- Looking ahead, Eurozone final inflation for April is released at 0900GMT with

it expected to remain unchanged at 1.2% y/y and core at 0.7% y/y.

- German 10-yr Bund yield is 2.3bp higher at 0.622%, while curve 2s10s is 0.8bp

flatter but 10s/30s 0.6bp steeper.