Markets continued to recalibrate ECB....>

EGB SUMMARY: Markets continued to recalibrate ECB tightening expectations

following further indications Wednesday morning that next week`s Governing

Council meeting could in fact be accompanied by an announcement on ending QE.

- 10-year Bund yields are up 6.3bps to 0.432%, with some bear curve steepening

on a 2s10s basis (up 3.2bps to 104.6bps), but 10s30s spread declining (down

2.6bps to 68.3bps) as 30s have outperformed.

- Italian BTPs have had a rollercoaster day on the ECB news, despite little new

insight on the new government`s economic platform, as the lower house prepares

for a vote of confidence. The 10-year spread over Bunds widened as far as

255.9bps at one point, but has retreated to 239.5bps, down 2.6bps on the day.

- Despite modest upticks in yield, Spain, Portugal, and Greece 10-year bond

spreads are all slightly tighter on the day amid the Bund sell-off.

- The hawkish rhetoric is impacting ECB rate expectations. MNI PINCH calculates

that markets have brought forward a 10bps rate hike from Sep19 to Jun19.

- Longer-dated Euribor futures have sold off sharply, with Green and Blue

contracts off 5.5-6 ticks, and Whites down just 1.5-2.