EGBS: 10-year BTP Yields Eyeing Convergence With OATs
Jul-10 13:15
10-year BTP yields now trade just 16bps above OATs, with the BTP/OAT spread tightening 30bps since the April 9 US Liberation Day U-turn. The spread is at its narrowest since 2007, and while some may look to the Jan 2007 closing low of 12.5bps as a support to monitor, most focus will be on the 0bp level.
- Several factors have contributed to Italian paper’s relative outperformance since April:
- The sharp reversal in risk assets and volatility metrics since April 9: The Eurostoxx 50 index has bounced 18% since April 9, while EUR 3m10y vol has fallen to its lowest level since 2022 (62bps).
- Relative political stability and fewer near-term fiscal risks in Italy compared to France: Although French PM Bayrou survived a censure vote at the start of this month after pension reform negotiations broke down, risks remain prevalent with further fiscal tightening needed to be delivered in the 2026 budget. If the proposed measures fall short of the far-right RN party’s expectations, it would likely see Bayrou lose a fresh vote of no confidence.
- Somewhat better trends in economic activity in Italy: Italian Q1 GDP growth was 0.3% Q/Q, above France’s 0.1%. Although Bloomberg consensus expects Q2 and Q3 growth at 0.1% Q/Q in both countries, the Italian June composite PMI at 51.1 was above France’s 49.2
- Although underperforming BTPs, the 10-year OAT/Bund spread has still been able to tighten ~7bps since June 19, now just above 68bps. This has mostly been driven by the German leg though, after the June 24th budget saw larger-than-expected deficit projections through 2029.
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GILTS: 10- & 30-Year Yields Trade Around Key Support Areas
Jun-10 13:07
Some of the benchmark long end UK yields are near/threatening clean breaks of key technical support levels.
- 10-Year gilt yields have pulled back towards the uptrend drawn off the Dec ’21 lows, printing as low as 4.531%. Uptrend support intersects at 4.517% today.
- 30-Year gilt yields have breached their equivalent trendline (5.259%), trading as low as 5.245%. Gilt bulls will look to force a close below that level. Next yield support comes in at the April 30 low (5.181%), followed by the April 7 low (5.044%).
- Moving average setups in both benchmarks are not biased towards lower yield levels at this stage, with the simple 50-DMA above both the 100- & 200-DMA in both instances.
US DATA: Softer Redbook Retail Sales Notes Price-Conscious Shoppers Amid Tariffs
Jun-10 13:00
Johnson Redbook retail sales showed some signs in slowing the first week of June, rising 4.7% Y/Y (week ending Jun 7), vs a targeted gain of 5.7%.
- A continued rise at the current pace would mark the softest month since January, and a continued deceleration from 6.7% in April (was 5.5% in May).
- May's Census Bureau retail sales (out next Tuesday) is seen printing 0.0% M/M after 0.1% in April. Roughly speaking that would translate into 4.8% Y/Y growth, after 5.2% in the prior two months, so also reflecting an early summer slowdown. All of these series are in nominal terms.
- The report notes that shoppers are becoming more "price-conscious" in light of tariffs: "Sales leader lists were more varied than in recent weeks, with slightly less emphasis on seasonal buying. As tariffs take effect, warehouse and discount stores are gaining popularity as shoppers become more price-conscious. June represents the peak of the retail business period, leading up to traditional July clearance sales and making it a crucial month for most retailers. Weather conditions will play a key role in helping stores recover any lost sales before the margin-reducing clearance season begins. Retailers expect the impact of Father's Day to unfold over the course of this week, while Independence Day falls in the fifth week of June on the retail calendar."
MNI: INVITATION: Livestream MNI Connect VC with Fed Daly On July 10
Jun-10 13:00
You are invited to listen to a Livestreamed MNI Connect Video Conference with the San Francisco Fed President Mary Daly.
Details below:
- Mary Daly joins us to discuss the ‘The US Economic Outlook and Challenges for Policymakers'
- DATE: Thursday, 10 July 2025
- TIME: 2:30 pm - 4 pm ET; 11:30am - 1pm PT; 7:30pm - 9pm London
- This event will be run as a Zoom Webinar and is a public, on-the-record event.
To register please go to: MNI Webcast Registration
