Periphery Spreads Tigher, Led by Italy

Periphery spreads to Germany are tighter in Monday morning trade, led by Italy and Portugal.

• Italy and Spain's manufacturing PMIs were a touch stronger than expected, while Germany's final reading undershot the flash print. However, all prints were below the 50-handle keeping growth concerns at the forefront in the Eurozone.
• Despite this, August unemployment figures out of the Eurozone and Italy showed continued labour market resilience, with the former printing at 6.4% (vs 6.5% prior; 6.4% expected) and the latter falling to 7.3% (vs 7.6% prior; 7.7% expected).
• The spread of 10-Yr Italian BTPs vs Bunds is 2.3bps tighter on the day at 192.0bps., offering some respite following the significant underperformance last week on the back of fiscal concerns and negative market sentiment.
• On Friday after close, Fitch upgraded Portugal to A- from BBB+. Subsequently, Portuguese bonds modestly outperform SPGs, prompting the 10y PGB/SPG spread to widen by ~1bps to 33.9bps.