Political risk in the periphery has.....>

EGB SUMMARY: Political risk in the periphery has pushed up spreads over Bunds

even further, though this time it is Spain that is leading the charge. 

- The Ciudadanos party has called on PM Rajoy for early elections, adding to the

pressure from the opposition Socialists` no-confidence motion registered Friday.

- Spain Bonos spread over Bunds, which had actually narrowed earlier in the day,

is now out 8.9bps, underperforming BTPs` 8.4bps move. This is reversing Spain`s

40bps outperformance over Italy in the preceding 2 weeks, and puts the Spanish

spread in danger of closing at a 4-month high, at 101bps.

- After mid-morning weakness, Bunds are coming back as the political noise picks

up. 10Yr yld is down 2.7bps to 0.445%, the 2018 low close of 0.431% in sight.

2s10s moving to the flattest since January, dropping 2.0bps to 104.1bps.

- With oil prices dropping, dampening inflation pressures, and ongoing periphery

woes, rate futures are bid, particularly at the long end. Green and Blue Euribor

contracts up about 2.5 ticks, with Dec20 at a 2018 high of 99.690.