EUROZONE ISSUANCE: EGB Supply W/C 15 December and Funding Plans Update

The timely Dallas Fed banking conditions survey for November saw its first declines in both loan volumes and demand in a year, in responses collected Oct 28–Nov 5.

• The Dallas Fed Banking Conditions Survey saw both loan volume and demand fall in November for their first declines in a year.
• “Volume declines were led by consumer and commercial and industrial lending.”
• This came despite relatively more favorable lending standards, which were unchanged after years of tightening – see charts. “Credit standards and terms were unchanged, while a broad-based decline was seen in loan pricing, with more than half of bankers reporting a decrease.”
• “Overall loan performance deteriorated at a faster pace than was reported in the previous survey. Bankers reported stable general business activity, and their outlooks remained mixed.”
• Indeed, a net 14% of firms reported higher NPLs, back closer to the 18% in August after just 1.5% in September.  
• “Survey respondents said they expect growth in loan demand and business activity but continued deterioration in loan performance over the next six months.”
• Whilst it’s a narrow survey only being focused on 70 financial institutions in the Dallas Fed district, it’s still useful as it offers a far more timely look lending conditions than the Fed’s more detailed SLOOS. 

• EUR/USD: $1.1575(E1.3bln), $1.1590(E1.7bln), $1.1600(E1.1bln), $1.1615(E1.1bln)
• USD/JPY: Y147.00($1.6bln), Y152.96-00($1.1bln), Y154.00($977mln), Y155.00($1.2bln
• AUD/USD: $0.6520-30(A$1.8bln)

Treasury comes to market at 1300ET today to sell $42B in new 10Y Note (CUSIP: 91282CPJ4) at auction.

• This Refunding sale comes following a quarter of mixed auction results for the 10Y: the August Refunding tailed 1.0bp, with September's sale trading through by1.4bp, followed by another tail in October.
• The 10Y saw the weakest auction of October among nominal coupons, with MNI's relative strength indicator awarding a poor score of -0.91. Aside from the 0.5bp tail (when-issued 4.112% vs high yield 4.117%), the sale saw 2.48x bid to cover with 9.1% primary dealer takedown.
• The 5-auction average is of a 0.2bp trade-through with 2.52x bid-cover, 9.9% primary dealer / 70.0% indirect / 20.1% directs accepted.
• Note there's been a slight concession today in 10s (-5.4bp) following the reopening of cash trade after Tuesday's holiday.
• The current when-issued yield of 4.075% would mark a small decline from the October auction's 4.117% but up from September's 4.033%.
• 10s have traded pretty neutral from a valuation perspective. On the 2s-10s-30s fly, 10s are trading at the middle of the range seen since end-July (-2bp to -18bp), at -10bp. Likewise 2s10s (currently 50bp) have been more or less rangebound over that period, with the steepening seen since mid-2023 having largely stalled out since April.