EU CREDIT UPDATE: BBG Primary Survey

• Reoffer: 99.617 to yield 3.145%
• Size: E5bln (above MNI's E3-4bln expectation)
• Books closed in excess of E43bln (inc E2.2bln JLM interest)
• Spread set: MS + 26bp (guidance was MS +28bps area)
• Hedge Ratio: 100% vs 2.90% Feb-36 Bund (ref: 100.48 +30.1bp)
• Coupon: 3.10%, Short first
• Maturity: 18 June 2036
• ISIN: IE000O6GBYC9
• Bookrunners: Barclays (B&D/DM), BofA Securities, Cantor Fitzgerald Ireland, Goodbody, J.P. Morgan and NatWest
• Settlement: 21 January 2026 (T+5)
• Timing: TOE 13:08GMT / 14:08CET

From market source / MNI colour

SOFR & Treasury options overnight volumes slowly picking up after a muted overnight session, focus on PPI at the bottom of the hour. Underlying futures holding modest gains, off highs. Projected rate cut pricing gains slightly vs. late Tuesday levels (*): Jan'26 steady at -1.2bp, Mar'26 at -6.6bp (-6.3bp), Apr'26 at -11.2bp (-10.7bp), Jun'26 at -24.1bp (-22.5bp).

• SOFR Options:
  • 10,000 0QU6 96.50 puts vs. 97.00/97.50 call spds ref 96.78
  • 2,500 0QG6 97.00/97.18 call spds
  • 3,500 0QH6 96.68/96.81/96.87/96.93 put condors ref 96.85
  • over 5,000 SFRJ6 96.37/96.43 put spds ref
  • 3,000 SFRH6 96.25/96.31/96.37 put flys
  • over 15,000 SFRJ6 96.43/96.50 3x2 put spds ref 96.59
• Treasury Options:
  • +10,000 TYG6/TYH6 112 put spds, 19 ref 112-11
  • Block, 8,000 TYH6 112.5 straddles, 1-09
  • -2,000 TYG6 112.25 calls, 14 ref 112-06.5
  • 1,275 FVH6/FVJ6 110 put spds on 2x1 ratio

Bonds have been in a bit of a holding pattern over the last few hours, consolidating gains that followed headlines out of Iran, noting that the country’s missile stockpile has increased since June and indicating a willingness to respond to attacks from any external sources.

• 10-Year Tsy and Bund yields have respected key upside levels through the initial rounds of ’26 trade (4.20% in the former, while demand came ahead of the ’25 high of 2.94% in the latter). Meanwhile, 10-Year gilt yields continue to trade within touching distance of their ’25 low (4.363%).
• Overweight in gilts is a favoured position amongst the sell-side. There is a focus on the potential for ongoing post-Budget reduction in UK-specific risk premia, with further tailwinds coming from ongoing softening in the labour market and a quicker than previously envisaged disinflationary process, which could facilitate swifter and deeper BoE easing.
• These factors, coupled with ongoing tailwinds from the DMO’s well documented WAM reduction when it comes to issuance, has allowed 10-Year gilt/Bunds to register the tightest close seen since September ’23 in recent sessions (albeit aided by a benchmark Bund roll), threatening a break below 150bp in the process.
• Meanwhile, the 10-Year gilt/Tsy spread has registered the narrowest close since July ’25, with questions surrounding Fed independence and a resilient U.S. economy driving some underperformance on the U.S. leg.