Italian bonds are outperforming.........>

EGB SUMMARY: Italian bonds are outperforming Tuesday.

- BTP futures have been gaining since the mid-morning auctions of CTZ/BTPei

which showed solid results. Jun 19s up 25 ticks at 129.59, having traded in a

range of 129.09-129.6 today.

- Spread of 10-Yr Italian BTPs vs Bunds is down 5.4bps at 247.8bps.

- Reuters sources story this morning suggested Italy`s cabinet was readying a

new budget package to boost GDP and avoid `belt-tightening measures`. While

ostensibly pro-spending, the headlines did not faze BTPs.

- Meanwhile, core EGBs are trading weaker. The Jun 19 Bund future is down 14

ticks at 165.52, near intra low of 165.50.

- German curve trading mixed: 2-Yr yield is up 1.3bps at -0.554%, 5-Yr up 1.3bps

at -0.386%, 10-Yr up 1.7bps at -0.011%, and 30-Yr up 0.8bps at 0.588%.

- Portugal, Greece, and Spain spreads vs 10Yr Bunds trading mixed, +/- 1bps.

- Euribor trading fairly flat, off 0.5-1.0 ticks across the strip.