The start of the week has been kind.....>

EGB SUMMARY: The start of the week has been kind to periphery EGBs, which are

rallying strongly across the board.

- With some signs of a Rome climbdown over budget targets, Dec 18 BTP future is

up 171 ticks at 124.05, having traded in a range of 122.91-124.83 so far. The

2-Yr yield is down 16.9bps at 0.774%,10-Yr is down 17bps at 3.237%.

- The 10-Yr BTP spread vs Bunds is down 19bps at 287.7bps, with Greek 10-Yr

bonds keeping pace (spread vs Germany down 17.9bps at 403.5bps), helped by

strong equity performances by local banks.

- Portugal and Spain not quite keeping pace but still 6-7bps tighter to Germany.

- For their part, Dec 18 Bund futures are down 33 ticks at 160.77; 2-Yr yield up

0.7bps at -0.573%, 5-Yr is up 1.3bps at -0.226%, 10-Yr is up 2bps at 0.36%.

- German Nov IFO came in weak, down for third straight month (0.9 pts to 102).

- Euribor futures off slightly, Blues down 1.0-1.5 ticks.

- ECB's Praet had little new to say on upcoming Monpol decisions, but sounded a

note of caution about the sustainability of Italian finances.

- ECB`s Coeure, Nowotny, Draghi up later.