Italian BTPs are the standout...........>

EGB SUMMARY: Italian BTPs are the standout performer among EGBs, with yields

across Europe heading broadly lower amid another thin volume day.

- The Italian curve has bull flattened as yields continue to test post-May lows.

2-Yr BTP yield is down 5.5bps at 0.596%, with 10-Yrs down 6.1bps at 2.516%.

- Spreads vs Bunds are down sharply as well - 5.8bps for 2-Yrs (last 121.8bps)

and 5.3bps for 10-Yrs (216.2bps).

- Spanish bonds are weakening at the shorter end, with 2-Yr yields up 0.4bps at

-0.298%, but the 10-Yr spread vs Italy is most notable, coming down in favour of

Italian BTPs by 4.8bps at 125.1bps, not seen since the first week of June.

- Bunds are up, with the Sep future rising 28 ticks to 162.75. The curve is a

little steeper, with 2-Yrs flat.

- That said, Germany had a strong Schatz auction this morning with the 0.00%

Jun-20 receiving 1.97x real cover and selling at -0.63% yield. Previously, four

of the six 2018 2-Yr sales had been uncovered, including last month`s.

- Euribor futures are up slightly across the strip, with Jun-22 the biggest

gainer, up 3 ticks at 98.50 albeit on wafer-thin volumes.