US-led geopolitical risk boosted........>

EGB SUMMARY: US-led geopolitical risk boosted safe-haven EGBs and reversed

earlier gains by EMU periphery debt. US Pres. Trump cancelling peace talks with

N Korea exacerbated existing fears over US trade policy and Italian politics.

- Bund Jun18 futures hitting a new 2018 high, up 44 ticks at 160.20, while OAT

Jun18s are up 61 ticks at 154.35, still 50 ticks off the 2018 high.

- Italian BTPs traded in a 2.31%-2.42% range, last at 2.398%, with 10-year

spreads over Bunds out 3.8bps to 193.11bps. Questions remain over the next

Finance Minister (eurosceptic Salvini, the more mainstream Zingales, or someone

else?), and the confidence vote tentatively scheduled for next week.

- The rest of the periphery tightened to Bunds (by just under 1bps for both

Spain and Portugal) though were significantly wider compared with morning lows.

Spain outperforming Italy, with 10Y Bonos trading 4.1bps further inside BTPs, at

around 100bps - a differential last seen in 2011.

- Euribor futures continue to rally, with flattening across the strip

accelerating from Wednesday. The Dec20 contract for instance is set for its

strongest close since Dec 2017, up 3 ticks at 99.670.