EGBS: 10-year Spreads To Bunds Unwind A Little Of This Week's Narrowing
Oct-17 08:47
Aforementioned risk-off in global equity markets pushes 10-year EGB spreads to Bunds up to 2bps wider on the session, with high-beta BTPs unsurprisingly underperforming. Despite today’s price action, spreads have still tightened on the week, led by France amid a reduction in near-term political uncertainty.
- That sees the 10-year BTP/OAT spread move back into positive territory at +3bps. Meanwhile, the 10-year OAT/Bund spread hovers around 78bps.
- Although PM Lecornu has survived this week’s no-confidence motions, risks remain present, and sellside desks remain cautious on the prospect of further OAT/Bund narrowing. Budget negotiations start from next week, and Lecornu will have to tread a fine line to maintain tacit support from the Socialist and Republican parties.
- Moody’s are scheduled to review France’s sovereign rating next Friday (Current rating Aa3, Outlook Stable). An outlook downgrade to Negative is probably in the price for OATs, but a downgrade to A1 would be a surprise (particularly given Lecornu’s recent survival as PM).
- At the April periodic review, Moody’s noted that “a reversal of the reforms implemented since 2017, such as labour market liberalization and pension reform, would be credit negative if we were to determine that this policy choice would have materially negative medium-term implications for France's growth potential and/or fiscal trajectory". A reminder that Lecornu has temporarily suspended the 2023 pension reform until the 2027 elections to appease the Socialists.
- In Italy, the coalition has reached an agreement to raise E11bln from banks and insurers over three years, including ~E4.3bln in 2026. Various figures for 2026 had been floated in recent weeks, ranging from E2.8-5.0bln.
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EQUITIES: Lower On Suggestion China Pushes Tech Cos To Cease Nvidia Chip Buying
Sep-17 08:44
E-minis offered after as an FT sources report notes that "China’s internet regulator has told the country’s biggest technology companies to stop buying all of Nvidia’s artificial intelligence chips and terminate their existing orders, as Beijing steps up efforts to boost its homegrown semiconductor industry and compete with the US".
- S&P 500 e-minis through yesterday's low, breaking 6,660. Initial support comes in at the 20-day EMA (6,559.62).
- Nvidia shares now indicated 1.1% lower pre-market.
- Prior reporting had suggested that Chinese firms were not satisfied with the Nvidia chip offering available to them, while Chinese regulatory scrutiny of Nvidia has stepped up in recent days.
FED FUNDS FUTURES: FFF6/G6 Lifted
Sep-17 08:29
FFF6/G6 paper paid -12.0 on ~3.9K.
EGB FUNDING UPDATE: Netherlands DSTA Q4 Funding Update
Sep-17 08:21
- The DSTA has reiterated its issuance target of E40bln on capital markets. The total borrowing requirement has been lowered by E1.8bln due to a lower expected cash deficit.
- The DSTA will hold three DSL auction in Q4: E2.0-2.5bln of the on-the-run 10-year 2.50% Jul-35 DSL (ISIN: NL0015002F72) on 11 November. There will also be two auctions of existing DSLs held on 14 October and 25 November.
- The six usual DTC auction dates will all be utilised and see both short-dated and longer-dated DTCs on offer at each.
- The DSTA will release its 2026 outlook on Friday 12 December.
