Periphery EGBs led by Spain have........>

EGB SUMMARY: Periphery EGBs led by Spain have recovered from earlier weakness,

though Bunds also remain stronger as equities remain lower.

- Bund Dec18 futures remain higher on the day, up 17 ticks at 159.51, despite a

risk-off backdrop with the DAX equity index down 1.8% (though 100 points above

the day`s low). 10-Yr Bund outperforming, yield down 1.3bps at 0.435%.

- BTP yields have fallen sharply following an early rise: 2-Yr down 6.9bps at

1.089, 10-Yr down 4.7bps at 3.443%. EU response to the Italian budget awaited.

- Spanish Bonos/Oblis are the outperformers though, 10-Yr yield falling 5.3bps

to 1.643%, spread to Germany down 4.1bps at 120.7bps. Belly outperforming, 5-Yr

yield down 5.6bps at 0.616%.

- Euribor is a little flat considering the circumstances, with little movement

in the short end of the strip, and Greens/Blues up 2.0-3.0 ticks.

- Data and ECB speakers thin today; all eyes on Brussels and the Italian budget,

though US earnings / Fed speakers could provide risk direction too.