Renewed concerns over Italian debt......>

EGB SUMMARY: Renewed concerns over Italian debt sustainability is the key theme

so far Tuesday, with BTPs underperforming. German inflation data now awaited.

- Italian Q3 GDP missed estimates, coming in flat Q/Q vs market expectations of

0.2% - providing further concern over the long-term outlook.

- BTPs sank, the Dec18 future last off 116 ticks at 121.57 (wide range of

121.25-122.90 today). 2-Yr yield suffering most, up 12bps at 1.08%. 10-Yr

spreads up 9bps vs Bunds at 305bps.

- BTP auction also weighing, decent demand but sharply higher yields.

- Meanwhile, Bunds have pared earlier losses, Dec18 future now off 2 ticks at

160.33, having traded as low as 159.96. Curve largely flat.

- It is largely an Italy story, though other periphery EGBs are a little weaker

now as well: spread of 10-Yr Spanish bonds vs Bunds up 1.9bps at 118.6bps,

Portugal up 0.4bps at 150.1bps, Greece up 3.0 bps at 386.3bps.

- German inflation out at 1200GMT; upside surprises to regional data out this

morning could portend a national upside surprise (consensus is for HICP 0.4% M/M

and 2.2% Y/Y).