Italian BTPs have weakened sharply to...>

EGB SUMMARY: Italian BTPs have weakened sharply to begin the week, with core

EGBs trading a little weaker.

- Risk-off Italy headlines over the weekend included a surge for Lega in Italian

polls vs 5-Star, compounding concerns over the Brussels-Rome conflict over the

budget ahead of the Eurogroup meeting today.

- The Dec 18 BTP future is down 37 ticks at 122.33, having hit a low of 121.93.

- Bund futures up 12 ticks at 159.75, in mirror fashion to BTPs is off the

159.91 high. Not much move in the curve, 2-Yr yield down 0.6bps at -0.621%,

10-Yr is down 0.3bps at 0.425%.

- Periphery EGB spreads a little wider, led by Italy: 10-Yr BTPs vs Bunds out

3.8bps at 293.1bps, Spain out 0.6bps at 115.1bps, Portugal up 0.4bps at 146bps,

and Greece (affirmed Friday by DBRS at B, Positive Trend) up 0.2bps at 387.9bps.

- Euribor strip remains a little flatter following Friday's MNI piece on ECB

looking at employing TLTROs in event of economic shock. Short-dated contracts

flat, Mar21-Sep22 up 1.5-2.0 ticks.

- Plenty of ECB speak this week; ECB VP Guindos speaks in Brussels at 1300GMT.