HUNGARY: Debt Management Agency Provides Update on 2025 Financing Plan

Gilts have taken cues from wider core global FI markets for much of the day.

• Slightly softer-than-flash final manufacturing PMI data did little for the market, but probably meant that early London lows were not re-tested. Futures last -19 at 90.33.
• The contract breached initial support (90.22), basing at 90.20, but leaving key support at late May lows (90.11) untested.
• Bears remain in technical control.
• Yields are 1.0-2.5bp higher. Curve bear steepens.
• 5s30s is on track for its first close above 150bp in the current cycle. Next upside level is the Feb ’17 high (152.63bp).
• Little change in the very front end of the GBP STIR strip on the day, with SONIA futures +0.5 to -3.5, twist steepening. August lows untested.
• BoE-dated OIS is steady, showing ~9bp of cuts through year-end. We think the November meeting is much more “live” than the 4bp currently discounted by markets.
• Fiscal risks remain front and centre in the UK. Today’s headlines have focused on operational adjustments within the government, with source reports playing down the likelihood of an impending cabinet reshuffle.
• A reminder that the DMO will introduce the new 4.75% Oct-35 gilt via syndication this week. That could come as soon as tomorrow.

• Today is the most notable single move in the EURSEK in a Month, since 1st August ~9 big figures range.
• For now the cross seems to be finding some support at the Psychological 11.0000 level.
• The early chart to watch was the USDSEK, now close to testing the 2025 low.

Goldman Sachs note that “although French assets have been under pressure, spillovers to the rest of Europe - and to EGBs in particular – have been contained. Ongoing declines in rates volatility help to contain risks to other sovereign spread markets. And there has been limited richening in Bunds vs. swaps compared to last year’s snap elections”.

• They provide two possible explanations:
• “Uncertainty in France has not reached the same level as last year, with parliamentary elections likely not yet widely expected and less speculation about President Macron resigning. In the same vein, markets may be drawing some comfort from having witnessed the relatively smooth transition from the Barnier to the Bayrou government last November”.
• “With the ECB cutting cycle now over, German fiscal easing underway, and a more challenging duration backdrop globally, the prospect of substantial Bund outperformance is dimmer”.
• Ultimately, Goldman continue to “expect Bunds to cheapen, both in outright terms and against swaps. That said, to the extent that we expect the cheapening in Bunds vs. swaps to be gradual, the increased tail risk in France and lack of reaction in swap spreads so far diminish the risk reward for tighteners, in our view”.