Periphery EGBs pared early losses -.....>

EGB SUMMARY: Periphery EGBs pared early losses - severe ones in the case of

Italy - as Italian political fears subsided.

- Italian BTP yields saw a wild day of trading, with 2-Yrs trading in a 44bps

range topping out at a seven-week high of 1.375%, but last trading down at

1.023% up 4.8bps on the day with a lack of negative news coming from budget

talks with PM Conte, deputy PMs Salvini and Di Maio, and Fin Min Tria.

- Spreads versus Bunds likewise hit the highest since early June, and remain

much higher on the week, but are off their highs. 10-Yr spreads up 8.0bps at

253.3bps, 10bps below today`s peak but 17bps higher on the week.

- Spain 10-Yrs are 1.8bps wider at 101.5bps and Portugal 2.2bps wider at

137.1bps, with Greek performance closer to Italy's, wider by 7.2bps at 369.3bps.

- German Bund yields set to close near week`s lows, 10-Yr at 0.413%, yield down

4.7bps today. Curve bull flattened, with 10-30 segment rallying in parallel.

- Short-dated Euribor weaker on heavy volume, Whites off 0.5-1 ticks.

- Next week is shaping up about as quiet as it gets, with some EMU

manufacturing/industrial data, a dearth of ECB speakers, and no EGB auctions.