VIEW: Goldman Sachs note that "sovereign.......>

EGBS: VIEW: Goldman Sachs note that "sovereign spreads have had three strong

tailwinds in the last month: the Franco-German Recovery Fund proposal, ECB

over-delivery, and a re-acceleration of growth. Although the backdrop remains

much improved, we think that upside surprises on each of these dimensions is now

harder. As expected, there was little progress from this week's EU Council,

setting the stage for Recovery Fund negotiations in July. During these

negotiations it is possible that the Recovery Fund is whittled back down towards

EUR500bn with a mix of grants and loans. ECB policy has settled into a strong

underlying pace, but net supply in the periphery remains broadly balanced rather

than deeply negative. Finally, while growth remains strong, the sequential

monthly pace of activity is set to slow. Overall valuation signals are neutral

here, suggesting modest room for spread compression. Within the periphery, 10y

Italy currently scans as cheap relative Portugal."