EUROZONE ISSUANCE: EGB Supply (2/2)
- Spain will come to the market on Thursday to hold a Bono/Obli auction. On offer will be the on-the-run 3-year 2.40% May-28 Bono (ISIN: ES0000012O59), the on-the-run 10-year 3.20% Oct-35 Obli (ISIN: ES0000012P33) and the 4.00% Oct-54 Obli (ISIN: ES0000012M93). The auction size will be confirmed on Monday.
- France will come to the market on Thursday, selling a combined E9.5-11.5bln MT OATs with both on the-run issues on offer as we’ve expected: the 2.40% Sep-28 OAT (ISIN: FR001400XLW2) and the 2.70% Feb-31 OAT (ISIN: FR001400Z2L7). Alongside these lines, France will be looking to sell the 0.75% May-28 OAT (ISIN: FR0013286192) and the 3.50% Nov-33 OAT (ISIN: FR001400L834).
- France will return later on Thursday to hold an IL OAT auction, with a combined E1.0-1.5bln of the 2.40% Sep-28 OAT (ISIN: FR001400XLW2), the 2.70% Feb-31 OAT (ISIN: FR001400Z2L7) and the 3.50% Nov-33 OAT (ISIN: FR001400L834) on offer.
NOMINAL FLOWS: The W/C 15 September will see redemptions of E36.1bln, most notably E17.0bln from a German Schatz, E14.0bln from an Italian CCTeu and E5.1bln from a formerly 10-year RFGB. Coupon payments for the week total E4.5bln of which E2.3bln are Italian, E1.0bln German, E0.9bln are Finnish and E0.2bln from the ESM. This leaves estimated net flows for the week at a negative E12.0bln, versus positive E25.4bln this week.
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CROSS ASSET: Bid In Bonds Extends, SOFR Options Flow Hedges Risk Of 50bp Sep Cut
Pullbacks from session highs in e-minis and crude oil futures seem to promote an extension of the rally in bonds.
- Note that SOFR options flow witnessed over the past couple of sessions has been geared towards an outsized 50bp cut in September, an idea outlined by Tsy Secretary Bessent on a couple of occasions over the last 24 hours.
- While such a move doesn’t appear likely at this stage, and we do not know the true driver of the flow, it is worth highlighting.
- Note that a 25bp cut is fully discounted for the September FOMC.
UKRAINE: Macron Says Trump To 'Fight' For Trilateral US-Russia-Ukraine Talks
Comments beginning to come through from European leaders following the video call with US President Donald Trump ahead of the Russia-US leaders' summit in Alaska on 15 August. Ukrainian President Volodymyr Zelenskyy, in Berlin alongside host, German Chancellor Friedrich Merz, says that there are "No talks without Ukraine", and that "There should be a meeting of three leaders." Zelenskyy calls for more sanctions on Russia, and says he hopes a ceasefire will be the primary topic in Putin-Trump talks. French President Emmanuel Macron claims Trump would "fight" for a trilateral meeting, possible in Europe.
- Comments from Merz: "We want Trump to be successful in Anchorage on Friday...European and Ukrainian security interests must be upheld in Alaska...We made clear to Trump, a ceasefire must come first in any agreement." Merz: "There is no question of legally recognising Russian territorial holdings, Trump largely shares our view on this."
- Macron: "Trump said he wants to obtain a ceasefire in Ukraine during his meeting with Trump...Trump also said that any territorial issues can only be negotiated with Ukraine." Macron: "Nothing is off the table concerning a new sanctions package against Russia...There haven't been serious talks about a Ukraine-Russia territory swap."
- NATO Secretary General Mark Rutte says NATO "appreciates Trump's leadership and close coordination with allies," and that "the ball is now in Putin's court."
- European Commission President Ursula von der Leyen says, "Today Europe, the US and NATO have strengthened the common ground for Ukraine...We will remain in close coordination."
MNI: US EIA: CRUDE OIL STOCKS EX SPR +3.04M TO 426.7M AUG 08 WK
- US EIA: CRUDE OIL STOCKS EX SPR +3.04M TO 426.7M AUG 08 WK
- US EIA: DISTILLATE STOCKS +0.71M TO 113.7M IN AUG 08 WK
- US EIA: GASOLINE STOCKS -0.79M TO 226.3M IN AUG 08 WK
- US EIA: CUSHING STOCKS +0.04M TO 23.1M BARRELS IN AUG 08 WK
- US EIA: SPR +0.23M TO 403.2M BARRELS IN AUG 08 WK
- US EIA: REFINERY UTILIZATION WEEK CHANGE -0.5% TO 96.4% IN AUG 08 WK
