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Periphery bond spreads have come off....>

EGB SUMMARY: Periphery bond spreads have come off their highs as Bunds pared
early gains and Italy yields edged down, but Tuesday remains one of the worst
days for non-core EGBs in years. Italy 10-year BTP yields rose by 29bps to
2.975%, down from the 3.439% high; spreads vs Bunds up 30.4bps at 264.4bps.
- As those figures imply, Bunds ended the day relatively flat. The 10-year
rallied to 0.188%, but has come back to 0.327%, down just 1.8bps on the day.
- Italy not the worst-performing periphery 10Y bond on Tuesday: that distinction
goes to Greece, whose spread went out 32.9bps vs Bunds to 447.1bps.
- By comparison, Spain 10s out 10.3bps (to 129.9bps) and Portugal out 13.3bps
(186.4bps), suggesting that contagion remains relatively contained for now.
- The long-end of the Euribor futures strip has come off its highs, but remains
elevated, with Blue contracts up 5.5-6.5 ticks). Whites are slightly offered,
down 0.1-0.2 ticks, leaving the futures strip at its flattest since 2017.
- Market awaiting news on proposed Italy PM Cottarelli's proposals for cabinet
positions, even if this is widely expected to be rendered moot by a failure to
win a confidence vote. BTP auction Wednesday bears watching too.

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