GREECE T-BILL AUCTION RESULTS: 13-Week GTB

German ASWs and swap spreads are little changed to a touch wider on the day, with the previously detailed bid in core global bond markets providing support.

• 10-Year swap spreads have ticked away from June highs in recent sessions, while 30-Year spreads continue to trade close to year-to-date highs.
• Geopolitical and macro headline risk will have factored into the widening seen through early June.
• Questions surrounding Germany’s ability to deploy its newfound fiscal headroom in economically viable projects is probably an additional factor behind the 30-Year spread widening that has been in play since early May, with pre-existing short positioning playing a part as well.
• As we have noted previously, the issuance outlook continues to point to a fresh move lower in spreads over the medium-term, but there are risks to that view.
• Goldman Sachs look for a medium-term move lower in swap spreads, noting that their estimates suggest that the “free-float of German debt is poised to increase by 14ppt as a share of outstanding, or 12ppt as a share of GDP by end-2027”.
• They highlight SAFE issuance as another headwind for spreads.
• Goldman don’t see major spread support from any reallocation to Bunds out of U.S. Tsys, nor on spillover stemming from any deregulation in the U.S.
• Their work points to “9bp and 11bp of cheapening in 2- and 10-Year German spreads respectively by end-2027”, although they caution that spreads screen cheap vs. more immediate fair value drivers.

• MNI: ITALY JUNE HICP 1.7% Y/Y (1.8% FCAST, 1.7% PRIOR)

• A new intraday low for the Estoxx futures, but very subdued volumes, around 4k sold in a 10 minutes window.
• Overall the price action is still limited and VGU5 traded as low as 5281.00 on Friday, the initial support area, now trading at 5327.00.