Risk sentiment has improved overnight and.....>

BONDS: Risk sentiment has improved overnight and this morning as Italy's

President Mattarella gives more time for the anti-establishment parties to come

up with a more agreeable cabinet. News that Savona might be Foreign Minister has

also underpinned risk-on sentiment.

- German 10-yr Bund yield is 6bp higher at 0.396% according to Tradeweb while

10-yr Bund/BTP spread is 42.1bp tighter at 227.4bps. The belly of the German

yield curve is underperforming the wings.

- There was some light relief that overall Eurozone flash inflation for May came

in at 1.9% y/y and not 2.0%, but core/semi-core EGBs remain close to session

lows. While Bond option flow has mainly been bearish

- There has been some screen selling in US Tsy note futures which were already

weighed by move lower in Bunds. US Tsy came under pressure during Asian session

following better China PMI data 10-yr note last 1.6bp higher at 2.871% with

yield curve bear flattening as long-end seen anchored.

- 10-yr JGB future is trading close to session low at 150.95, 2 ticks lower,

while Gilts are taking cue from fall in Bunds and are 47 ticks lower at 122.96.