### POV, Chances of rate hikes...>

US EURODLR FUTURES: ### POV, Chances of rate hikes are double-timing a retreat,

factoring in foreign geopol-risk.

- Anxiety over Italian political turmoil has spilled over to global markets.

Heavy safe-haven/risk-off support for Tsys after German bunds surged overnight.

Italian bond yields gapping higher (5Y yld 2.975, 10Y 3.131%) on unconfirmed

rumors that Italian PM Cottarelli had given up mandate, recently denied as he

"needs time to resolve Govt list". Spill-over has Portugal, Spain, Greece spds

vs. Bunds all gapping wider. Again, unconfirmed mkt chatter over Italy exit from

EU is quick to make the rounds.

- Eurodollar futures have followed Tsys higher Reds-Greens (EDM9-EDH1) have

surged to +0.130-0.150 higher. As a result, however, markets are implying a

sharp drop in rate hike chances not only for June (72.4% according to MNI PINCH

model vs. 100% last week) but for the rest of 2018 into 2019. September chances

have fallen to 19% while December is down to 64% from a lock last week as well.

- Current valuations appear to be overdone, with panic driving rally more than

sense. presents opportunity to buy cheap downside insurance ahead Fri's NFP.