EGBS: Bunds Look Through Firm EZ Data; Focus Shifts to US NFP
Bund futures have been largely undeterred by the stronger-than-expected Eurozone flash April core HICP print and upward revisions to the April manufacturing PMIs. After gapping lower at the open in response to a more optimistic US trade deal backdrop, RXM5 has recovered well from session lows of 131.34, with yesterday’s low of 131.33 containing downside. The contract is -14 ticks versus Wednesday’s settlement at 131.64.
- Initial resistance in Bund is still at the opening gap, situated at 131.93, but most are still eyeing the April 7 high and bull trigger at 132.03.
- The firmer-than-expected Eurozone data has somewhat limited the recovery at the short-end though, with Schatz yields up 3.5bps and the curve bear flattening.
- Eurozone flash April core HICP was 2.72% Y/Y (vs 2.43% prior), above the highest analyst estimate we had seen ahead of the release. Services inflation was biased higher by Easter-timing related effects.
- Meanwhile, the April EZ manufacturing was 49.0 (vs 48.7 flash, 48.6 prior) and March unemployment was 6.2% (vs 6.1% cons, 6.2% prior).
- 10-year EGB spreads to Bunds are mixed. The BTP/Bund spread is little changed on the week at 111.5bps.
- Focus turns to the US labour market report at 1330BST/1430CET.
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GREECE T-BILL AUCTION RESULTS: 13-Week GTB
| Type | 13-week GTB |
| Maturity | Jul 4, 2025 |
| Amount | E500mln |
| Target | E500mln |
| Previous | E500mln |
| Avg yield | 2.03% |
| Previous | 2.37% |
| Bid-to-cover | 1.91x |
| Previous | 2.45x |
| Previous date | Jan 29, 2025 |
GILT AUCTION RESULTS: 1.125% Sep-35 Linker
Corrects for pre-auction midprice.
| 1.125% Sep-35 Linker | Previous | |
| Amount | GBP1.60bln | GBP1.60bln |
| Avg yield | 1.268% | 1.115% |
| Bid-to-cover | 3.36x | 3.52x |
| Tail | N/A | N/A |
| Avg price | 98.600 | 100.100 |
| Pre-auction mid | 98.511 | 100.045 |
| Previous date | 25-Feb-25 |
GREECE: PM Unveils Multi-Billion Euro 12-Yr Defence Programme
Speaking as part of a parliamentary briefing and debate on defence and armaments, PM Kyriakos Mitsotakis saying that his gov't is planning to spend E25bln as part of a new 12-year defence plan running to 2037. Mitsotakis claims that "There can be no progress without security," and that the moves announced today represent the most "dramatic restructuring of the Armed Forces in modern history."
- Mitsotakis says that domestic procurement will be at the heart of these developments and that significant Greek involvement in production should become the norm. Defence Minister Nikos Dendias has issued a directive calling for Greek participation in at least 25% of future defence projects. Given the nature of EU regulations on tendering processes, it remains to be seen how cast-iron this commitment will be.
- Referring to the ReArm Europe defence spending package and the 'escape clause' from the excessive deficit procedure, PM says "the EU as a whole is called upon to redefine its position". Mitsotakis: "This fiscal flexibility should not and will not become a reason for excesses."
- ReArm Europe received the backing of Mitsotakis' centre-right New Democracy and the main opposition centre-left PASOK. The two hold a combined 188 seats in the 300-member parliament, ensuring more than enough support. The parties of the far-left (Syriza, Communist Party, Course of Freedom), holding a combined 53 seats voted against, while the far-right (NIKI, Greek Solution) abstained.
- Greece is already one of the highest NATO spenders as a % of GDP, coming in at 3.08% in 2024.
