In Europe, long-end Bunds weakened.....>

BOND SUMMARY: In Europe, long-end Bunds weakened and the rates future strip bear

steepened as hawkish commentary from ECB's Praet and Weidmann fuelled

speculation that next week's ECB Governing Council meeting could deliver an

announcement on winding down QE.

- Italy's relief rally is looking short-lived, as ECB tightening and the new

government`s economic policies are perceived as significant risks to debt

sustainability. 2Y BTP yields are up 29bps at 1.299% and 10s up 14.5bps at

2.935%, leading to major curve flattening (2s10s down from 178bps to 163bps).

- 10Y Bund yields up 5.4bps at 0.443%. UK Gilts following suit (up 5bps at

1.334%), amid newswire reports of Labour shifting its position to a more soft

Brexit likely weighing as well despite it putting more pressure in PM May.

- This bearish shift in Europe is translating to similar moves in USTsys and

JGBs.  10Y UST yield is up 1.3bps at 2.942%, with the 2s10s curve steepening

0.5bps to 43.7bps. JGB June futures are off 3 ticks at 150.81.

- Bearish steepening across rate strips. Green and Blue contracts lower in:

Euribor off 5-5.5 ticks, Short Sterling off 3-4 ticks, Eurodollar off 2-2.5.