German Bunds rocketed higher and........>

EGB SUMMARY: German Bunds rocketed higher and Italian spreads soared as the week

came to a close, in a decisively negative verdict on the 5-Star/Lega`s governing

plan, and risk being taken off ahead of potential weekend headlines. 

- Jun18 bund futures shot up 35 ticks from 1430BST onward, accelerating around

1530BST after news emerged that Lega`s leadership had approved the plan (saw a

large RXM8 futures block buy at 1523BST). The future last up 68 ticks at 158.55.

A 3bps move lower in 10Y USTs also provided a bit of added room for the rally.

- 10Y BTPs headed in the opposite direction, with yields hitting a 10-month high

of 2.23%, up 11.5bps and widening the spread over Bunds to 164bps, up 16.6bps

(briefly hitting a 6.5-month high of 164.3bps).

- Periphery got hit all around vs Bunds, Portugal out 11.8bps, Spain out 9.7bps.

- Significant flattening action across the board, concentrated at the 10-year

tenor for Germany as Schatz barely rallied, with 2s10s down 2.7bps to 117.0bps.

- Same story in Euribor strip, with Blues up 4.5 ticks, and Whites unmoved.

- Light week of issuance coming up, as only Slovakia and Germany tap markets,

and apart from Italy news, Monday should be quiet due to national holidays.