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.