Italian spread widening reversed........>

EGB SUMMARY: Italian spread widening reversed sharply Monday afternoon on

positive fiscal headlines, while Bunds went in the opposite direction.

- Rumblings of fiscal responsibility caused Italian BTPs to rally around

1530BST, with Reuters citing `sources close to the dossier` that Fin Min Tria is

pushing the government coalition to keep the 2019 fiscal deficit target below 2%

of GDP; this was paired by Bloomberg citing an Ansa report quoting Deputy PM

Salvini saying that the 2019 budget law will `respect all rules`.

- 2-Yr BTP yields were last down 4.4bps at 1.4216%, having hit 1.504% earlier,

moving spread over Germany down 4.7bps at 202.3bps (was 211.4bps earlier).

- Sep8 Bund futures are off 2 ticks at 163.25, having risen as far as 163.49.

Bund curve is a little steeper, with 2-Yr yields up 0.1bps at -0.604%, and 10-Yr

up 0.3bps at 0.329%.

- OAT curve steeper: 2-Yr yield up 0.2bps at -0.433%, 10-Yr up 0.8bps at 0.691%.

- Euribor slightly stronger on the day, with entire strip up 0.5 ticks.

- Tuesday sees a pick-up in EGB supply (Austria and Germany), along with EMU PPI

data in the morning at 0900GMT.