EM CEEMEA CREDIT: Dev. Bank of Rwanda: Fitch affirms. Neg outlook

Bund swap spreads and ASWs lack any real sense of direction today, trading within 0.5bp of Friday’s closing levels, with the recovery from session lows in German paper limiting any spread narrowing impulses.

• The long end of the swap spread curves look the heaviest intraday, owing to the twist steepening on the cash bond curve.
• Goldman Sachs note that the “increase in Bund net supply, together with ECB QT, raises the hurdle for Bund richening vs swaps. However, the modest pace of issuance increases also points to more gradual spread tightening from here (especially considering how far Bund spreads have run ahead of free-float) and the stabilisation in funding costs. We continue to think the market underprices the macroeconomic impact of the fiscal boost, with evidence on spending likely only starting to accrue in Q4”.
• On the outright Bund front, they note that “survey indicators continue to point to eventual cyclical improvement, and we maintain our 3.0% end-25 forecast for 10-Year Bunds”.

Atlanta Fed President Bostic (non-2025/2026 FOMC voter) appears to have stuck to his pre-September Fed meeting outlook for just 1 cut this year, telling the WSJ in an interview that "I had one cut for this year. I didn't say the timing for that. So this could easily be the one cut. And so for that, I'm fine with it. I think moving forward, the data is going to be really important and here's what I would say. Forecasting is really hard these days and so I still have one cut down for the year. So that would be it."

• That makes him among the 7 most hawkish members on the Committee in terms of 2025 rates, with 6 of 19 members writing in 4.1% end-year Fed funds in the Dot Plot (1 member wrote in 4.4%, a hold vs the 25bp cut already delivered). Before the September meeting, Bostic said that the Fed should be able to bring policy closer to neutral next year, though he doesn't address that timeline in this interview, instead suggesting that it is going to "take some time" to get sufficient confidence to ease further.
• He says he's adjusted his unemployment and inflation forecasts up, having not yet seen "resolutions" to uncertainty over the labor market and inflation stemming from tariffs. For core PCE he sees 3.1%/headline 2.9% for 2025 and not coming back to target until early 2028, while for unemployment he sees 4.5% in 2025 and 4.4% in 2026.
• Bostic acknowledges the broader FOMC message that "the risks have shifted" but for him, "the risk to the price-stability mandate is still the most significant". And "I don't think the labor market is in crisis right now."
• He's not ruling out support for further cuts this year. He says that he wrote his one-cut 2025 projection "into the SEP with a very light pencil. That information could come in to really reshape my views of the relative balance of risks, and in that case I'd be willing to respond to that."
• While he currently doesn't support a cut at the October meeting, Bostic says that between now and then he will be paying special attention to regional business surveys and sentiment around the workforce: "to the extent that that sentiment remains stable or if it shifts in a dramatic way, that's information that I would definitely take on board in terms of thinking about whether my policy posture should change or the posture of our policy should change."

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