PERU: Analyst Views On BCRP Decision
Sep-12 08:59
- BBVA says that with the policy rate very close to neutral, further nominal cuts will require a meaningful shift in inflation expectations or a materialisation of risks requiring the central bank to move off neutral. BBVA believes that the impact from the cut is likely to be mild, as markets had been expecting a move to be imminent, even if they were split about whether it would be in this particular meeting. The PEN broke its recent appreciation momentum at about 3.48, and the BCRP cut may provide impetus for some consolidation after gains that took the currency to five-year highs.
- Goldman Sachs sees the policy rate remaining at 4.25% for the foreseeable future. With a largely closed output gap, well-anchored inflation expectations, and only a marginally restrictive policy stance, there is limited urgency to either address inflationary pressures or stimulate economic growth. GS does not foresee the need for easing that would bring the policy rate below neutrality, but remains open to such a scenario should domestic activity weaken more than anticipated, or should the political dynamics and business sentiment deteriorate as the 2026 Presidential elections approach.
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BTP: Block Trades in 2yr and 10yr
Aug-13 08:54
ouple of Italian 2yr and 10yr Block trades, it looks closely weighted and could be a flattener.
- BTSU5 ~2.34k sold at 107.76.
- IKU5 1k bought at 121.12.
GERMAN AUCTION PREVIEW: 2.60% Aug-35 Bund
Aug-13 08:46
This morning, Germany will re-open its on-the-run 10-year 2.60% Aug-35 Bund (ISIN: DE000BU2Z056) for E5bln.
- The size of this auction is in line with the last reopen of the Bund on July 23.
- Demand metrics in German auctions have been a little mixed recently, and that also applies to the 10-year segment. At the last July 23 auction of the 2.60% Aug-35 Bund, the bid-to cover came in at 1.49x and the bid-to-offer at 1.14x - clearly on the weaker side, and a deterioration against the 1.63x / 1.24x seen at the initial opening of the line despite that being for a larger E6bln size. These metrics compare to a 1.38x - 2.84x range for bid-to-covers and a 1.06x - 2.17x range for bid-to-offers seen in German 10y auctions this year.
- At least the secondary market mid-price was below the low price achieved at recent German 10y auctions (the last time that was not the case was on April 23).
- Bund positioning currently appears short according to our Europe PI - full pdf here.
- Today's results will also be interesting to watch in the light of the Bund price action across the past two days, which lacked a clear headline driver, but notably brought 30y yields to 14-year highs.
- The next German auction will be E4.5bln of the 2.20% Oct-30 Bobl (ISIN: DE000BU25059) on August 19, while the 2.60% Aug-35 Bund will be re-opened on September 3, also for E5bln.
- Timing: Results will be available shortly after the bidding window closes at 1030BST/1130CET.
SWAPS: German Spreads Recover From Recent Lows Alongside Outright Bond Rally
Aug-13 08:36
German swap spreads and ASWs widen alongside the recovery rally in outright bonds this morning, recovering from multi-week/month lows registered yesterday.
- Bull flattening on the cash bond curve translates to outperformance for long end swap spreads & ASWs.
- Earlier today Commerzbank noted that “Schatz-ASW breached the recent range, briefly hitting 11bp vs. €STR yesterday. This marks the cheapest levels since early March when the German fiscal package was making headlines and slightly exceeds current German GC spreads vs. €STR. Without structural cheapening in repo rates and other front-end drivers, we expect Schatz to stay anchored with GC serving as cap similar to the past months and anticipate spreads will reverse".
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