EGBS: 10-year Bund Yields Push To Fresh Multi-Week High
Nov-20 10:32
10-year Bund yields trade at a fresh multi-week high of 2.72%, extending the upward trend that began in mid-October. The 2.75% level presents the next area of interest on the topside, but a push towards 2.80% may require a catalyst such as Germany’s 2026 issuance plan. We’ll follow up with more details on Germany’s monthly fiscal update later today.
- The German curve is marginally steeper, with yields up to 1bp higher across the curve. Upward pressure since yesterday afternoon looks to be a function of the recovery in risk assets (prior to and following Nvidia’s earnings) and a cautious set of FOMC minutes.
- Bund futures are -11 ticks at 128.56, albeit off lows of 128.48. Support remains unchanged at 128.41.
- 10-year EGB spreads to Bunds are up to 1bp narrower, with PGBs underperforming a little. Details of Greece’s 2026 budget reaffirmed well-documented fiscal resilience, while French and Spanish auctions were digested smoothly.
- ECB Governing Council member Makhlouf suggested the bar to another rate change is high, seemingly aligning with the median Governing Council member’s view.
- Global focus remains on today’s US labour market data (payrolls and IJC at 1330GMT).
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ESM ISSUANCE: 6-Month ESM-Bill Auction Results
Oct-21 10:32
| Type | 6-month bills |
| Maturity | Apr 23, 2026 |
| Amount | E1.095bln |
| Target | E1.1bln |
| Previous | E1.084bln |
| Avg yield | 1.979% |
| Previous | 1.984% |
| Bid-to-cover | 2.55x |
| Previous | 2.46x |
| Previous date | Sep 16, 2025 |
STIR: Fed Rate Path Holding Two Consecutive Cuts Before Quarterly Clips
Oct-21 10:29
- Fed Funds implied rates are little changed on net overnight, holding close to 50bp of cuts to year-end (consecutive 25bp cuts) before an additional ~50bp of cuts with the June FOMC.
- Cumulative cuts from 4.11% effective: 25bp Oct, 49.5bp Dec, 64.5bp Jan, 77.5bp Mar, 85.5bp Apr and 99.5bp Jun.
- SOFR futures range from -/+1 tick on the day looking out to end-2027, with small losses led by the M6 and gains by 2027 contracts after paring an earlier rally.
- The SOFR implied terminal yield of 2.93% (-0.5bp) holds at recent levels having closed at 2.93/2.935% in the past two sessions. Timing of this terminal continues to flit between the Z6 and H7.
- Thursday’s 2.89% close was the lowest in a month whilst cycle lows were seen at 2.77% back in Sep 2024 in anticipation of an aggressive start to the Fed’s easing cycle at the time.
- Today sees another light data docket, with the Philly Fed non-mfg index along with weekly Redbook retail sales, leaving greater scope for potential spillover from the Canadian CPI report for September ahead of the delayed US release on Friday.
FRANCE: Macron-We Will Have To Reopen Debate On Pensions, Referendum Possible
Oct-21 10:27
Speaking in Slovenia, President Emmanuel Macron defends his 2023 pension reforms. The introduction of the reforms, which were set to raise the pension age from 62 to 64, has been postponed until Jan 2028. Came as PM Sebastien Lecornu offered a major concession to the centre-left Socialist Party in an effort to avoid a vote of censure.
- Macron: "On the pension issue, the facts are stubborn: we are getting older [...] The (2023) reform was necessary, as presented during the 2022 presidential campaign. The Prime Minister chose to calm the current debate, proposing to postpone the deadline, with financing through savings. The parliamentary debate will determine the outcome of this issue."
- Macron: "The future of our pay-as-you-go system is not balanced with the current retirement age [...] We will have to reopen the debate. I welcome the Prime Minister's reopening of the debate; it must be done calmly. The prospects of a referendum are possible, but we still need to know what it will be on."
- A referendum would be a risky move. An April opinion poll showed 68% of respondents in favour of a referendum on the pension reform, with 65% saying they would vote for the repeal of the reform and only 35% in favour.
- Indeed, 56% of respondents were in favour of lowering the retirement age to 60. While this will not be implemented (risking massive financial market backlash), it demonstrates the massive obstacles posed by public opinion that any French gov't will face in attempting to reform gov't finances.
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