The week concluded on a risk-on note,...>

EGB SUMMARY: The week concluded on a risk-on note, with periphery EGBs

outperforming and Italy enjoying relief from political concerns, though much

remains to be seen as 5-Star and League negotiate over the weekend.

- Italian BTPs rallied (Jun18 future up 45 ticks to 137.75) as reports emerged

that 5-Star has pledged to respect the EU`s deficit rules, and the coalition

with League will not seek euro exit.

- Friday`s BTP recovery means the 10Y spread over Bunds (132.5bps) remains in

its 12-month downtrend. Top of the trend channel is 140bps, bottom 100bps. The

5.0bps spread drop Friday surpassed Spain (2.7bps) and Portugal (3.0bps).

- The Bund curve steepened slightly, with 2s10s rising by just under 1.0bps to

114.2bps, with 2-Yr yld down 0.4bps and 10s up 0.5bps. Little action elsewhere,

with OAT curve ending flat.

- The Euribor futures strip also ended the week on a steepening note. Blues fell

2.5-3.0 ticks while whites were up half a tick.

- A muted reaction to ECB President Draghi`s speech on EMU risk-sharing, with no

commentary on the monetary policy outlook.