Italian yields have subsided from.......>

EGB SUMMARY: Italian yields have subsided from Tuesday's highs but remain

elevated, as the market awaits more details on the controversial 2019 budget.

- Spreads came down a little after PM Conte reinforced "euro is our currency and

is irreversible for us", hours after eurosceptic lower house budget committee

head Claudio Borghi said Italy could solve its fiscal woes with its own currency

(he rowed back this comment later).

- However, the 2.4% of GDP target looks to remain contentious, with Deputy PM Di

Maio saying Rome would not move `a millimetre` from that target. Government

meeting set for 1700GMT, eyeing budget going to parliament Weds.

- Dec 18 Bund future is up 75 ticks at 159.52, though off 159.78 high. Curve

bull flattening (2-Yr yld down 2.1bps at -0.562%, 10s down 4.3bps at 0.428%).

- Dec 18 BTP future down 144 ticks at 121.28, having traded in a range of

120.89-121.75. Mainly an Italy rather than periphery EGB move per se; Italy over

Spain 10-Yr spread at 184.8bps, nearing 2011 record just above 200bps.

- That said, Greek 10-Yr spread has moved out further than Italy, up 16.6bps at

391.4bps, compared w BTPs up 13.5bps at 296.3bps.