FINANCIALS: Banco Comercial Portugeus - Moodys upgrades BCA - Tier 2 rising star

Citi remain “positioned for the market to keep adding BoE cuts as tariffs announcements turn to economic reality via SFI M5/M6 flatteners”.

• They believe that “worries about economic activity should allow the BoE to look through higher near-term inflation and induce a faster, catch-up easing cycle which should support a lower yield environment across the term structure over the medium-term”.

This morning, Germany will hold its sixth Schatz auction of the year. On offer will be E5.0bln of the new 1.70% Jun-27 Schatz.

• The E5.0bln size is in line with the last Schatz launch on January 28.
• Recent Schatz auctions have passed mostly smoothly, with solid bid-to-covers (in a 2.09x to 3.46x range since August) and bid-to-offers (1.69x to 2.63x range since August). The low prices were above the secondary market mid-prices throughout 2024/5 before the February 18 Schatz auction saw them equal to each other, and then the low price was lower than the mid-price on March 11 - both auctions appeared to have not seen an adverse market reaction, however.
• Additionally, the last Schatz auction on April 1 appeared strong with the bid-to-cover at 3.46x (multi-year high), and the bid-to-offer at 2.63x.
• However outside of Schatz auctions, there have been some weak German auctions recently. Last week's Bobl auction was very soft, the 10-year Green Bund auction the week prior was also soft and last week's 30-year Bund auction was a little more successful but still disappointing relative to other recent auctions.
• Today's auction will therefore be watched more closely than usual.
• Ahead of the Easter holidays, Schatz positioning appeared increasingly long (see the MNI PI).
• The next German auction will be tomorrow's E4bln of the 2.50% Feb-35 Bund (ISIN: DE000BU2Z049), while the 1.70% Jun-27 Schatz will be reopened next on May 13, for E4.5bln.
• Timing: Results will be available shortly after the bidding window closes at 10:30GMT / 11:30CET.

SFRU6/H7 ~4.2K trades at 9.5, initiated by a seller to start.