Periphery EGB yields are rallying.......>

EGB SUMMARY: Periphery EGB yields are rallying strongly, with Italian yields

coming down sharply and Bund yields edging higher in a risk-on move.

- The Italian BTP curve is bull steepening as the short end has outperformed.

2-Yr yields are down 7.0bps at 1.218% while 10-yrs are down 4.5bps at 3.075%.

- While BTP spreads remain elevated after hitting 2.5 month highs last week,

they are coming down as Bund yields are also higher. 2-Yr spreads are in 7.8bps

vs Bunds, with 10-yrs in 5.0bps.

- Spanish and Portuguese spreads are likewise tighter, with 10-Yr Bonos in

4.6bps at 109.8bps and 10-Yr PGBs in 4.7bps at 150.2bps.

- The German Bund curve has shifted higher, 2-Yrs underperforming slightly up

0.7bps at -0.643%, and 10-Yrs 0.5bps higher at 0.310%.

- Net supply potentially weighing, with Germany the sole EGB issuer this week,

coming to the market twice with E4bln in Schatz Tuesday and E3bln in Bunds

Wednesday, and virtually no redemptions/coupon payments in EMU this week.

- Buba`s Johannes Beerman speaks at 1600GMT, with ECB's Weidmann at 1800GMT.