ECB: De Guindos Says ECB Better Understands Balance Sheet Policy Side Effects

DBK (19th Sep) 34.5/35.5, bought for 0.14 in 10.5k.

• EU-bonds underperform Bunds this morning, after Bloomberg reported overnight that ICE will not include EU-wide joint debt in its sovereign bond indices.
• Difficulty in securing index inclusion is not a new challenge for EU-bonds, with ICE rejecting a similar proposal last year.
• The Bloomberg report noted that “Even supporters of the change [i.e. to include in indices] commented that the EU is something neither/nor, something of a sub-sovereign or supra-sovereign agency rather than a typical sovereign entity”
• 10-year spreads are 2.5bps wider today at ~31.5bps, with other EGB spreads to Bunds up to 1bp tighter on the session.
• The combination of increased German issuance expectations and a pullback in EUR rates vol have contributed to broad-based EGB spread tightening to Bunds since the start of May. EU-bonds have participated in this dynamic, closely tracking similarly priced peers like RAGBs during the period.

SFRU5 96.00/96.125/96.25c fly, bought for 0.75 in 18k total.