OAT: Block Trade

DUU5 107.20 puts, bought for 8 in 6k

• DUU5 currently 107.325, little changed on the session.

• MNI: ECB Q2 ENTERPRISE CREDIT STANDARD -1
• MNI: ECB Q2 ENTERPRISE DEMAND +2
• MNI: ECB Q2 HOUSE PURCHASE STANDARDS +2
• MNI: ECB Q2 HOUSE PURCHASE DEMAND +37
• MNI: ECB Q2 CONSUMER CREDIT STANDARDS +11
• MNI: ECB Q2 CONSUMER CREDIT DEMAND +2

The ECB’s Q2 BLS feels supportive of market expectations for one more 25bp cut this cycle - but does not signal a need to rush back into sequential rate cuts following a likely pause at Thursday's decision. While credit demand from firms rose relative to Q1, momentum remains weak amid ongoing uncertainty and trade tensions. Meanwhile, firms reported a broad-based tightening of standards across counterparties. However, expectations for Q3 are more optimistic.

• Banks reported a slight net increase in loan demand from enterprises, but demand remains weak. “Loan demand was supported by declining interest rates, but dampened by global uncertainty and trade tensions, while the impact of fixed investment and inventories and working capital was neutral”. This is consistent with a loss of momentum in NFC credit demand growth in more timely monthly statistics.
• Demand for housing loans on the other hand “continued to increase substantially”, due to “Declining interest rates, improved housing market prospects and, to a lesser extent, consumer confidence”.  Meanwhile demand for non-housing household loans “increased only slightly”.
• There was a slight tightening in credit standards for firm and mortgage loans, and a more pronounced tightening for non-housing household loans. “Perceived risks related to the economic outlook continued to contribute to a tightening of credit standards, whereas competition had an easing impact. For the most part, banks reported no specific additional tightening impact on their credit standards related to geopolitical uncertainty and trade tensions, although they intensified their monitoring of the most exposed sectors and firms”.
• Looking ahead, in Q3 “banks expect a net increase in loan demand from firms (net percentage of 7%), a further substantial net increase for housing loans (net percentage of 21%) and broadly unchanged demand for consumer credit (1%)”.
• Meanwhile, “banks expect credit standards to remain unchanged for firms (0%), ease slightly for housing loans (-3%) and tighten further for consumer credit (4%)”.