EUROZONE ISSUANCE: EGB Supply – W/C 22 September (2/2)
- Italy will look to hold a BTP Short Term / BTPei auction on Wednesday with E2.0-2.5bln of the on-the-run 2.10% Aug-27 BTP Short Term (ISIN: IT0005657330), E1.00-1.25bln of the 1.10% Aug-31 BTPei (ISIN: IT0005657348) and E1.00-1.25bln of the 2.40% May-39 BTPei (ISIN: IT0005547812) on offer.
- Germany will return to the market on Wednesday with E4bln of the 7-year 2.50% Nov-32 Bund (ISIN: DE000BU27014) on offer.
- Italy will conclude issuance for the month on Friday with a 5/10-year BTP / CCTeu auction. Details will be confirmed on Tuesday. We expect the 2.70% Oct-30 BTP (ISIN: IT0005654642) to be on offer alongside a final reopening of the 3.60% Oct-35 BTP (ISIN: IT0005648149). However, there is a chance that a new 10-year BTP is launched, and also a good chance that there is an off-the-run 10-year BTP on offer alongside the 3.60% Oct-35 BTP. The Apr-34 CCTeu has been on offer at every auction since its launch in May.
NOMINAL FLOWS: The upcoming week will see redemptions of E7.1bln, E6.0bln from a formerly 10-year ESM bond and E1.1bln from a formerly 10-year LATVIA bond. Coupon payments for the week total E3.0bln of which E2.8bln are French. This leaves estimated net flows for the week at a positive E24.9bln versus negative E17.9bln this week.
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PIPELINE: Corporate Bond Update: $3B ADB & $3B British Columbia Priced Earlier
- Date $MM Issuer (Priced *, Launch #)
- 08/20 $3B *ADB 5Y SOFR+39
- 08/20 $3B *British Columbia 5Y SOFR+53 (books were over $8.7B)
- 08/20 $Benchmark Nordea Bank 5Y +50, 5Y SOFR+83
- 08/20 $600M #Athene Global 10Y +125
- Expected Thursday:
- 08/20 $1B Nordic Investment Bank WNG 3Y SOFR+34
- 08/20 $Benchmark Quebec 10Y SOFR+90a
US TSY OPTIONS: September Tsy Option Expiration Roundup
Reminder, Sep'25 Treasury options expire Friday, the latest open interest as of Tuesday's close outlined below. Options that are 0.5 tic in-the-money (0.25 tic for 5- & 2Y option) are auto-exercised. Underlying futures are firmer this morning following lower build permits (outweighing rise in starts), projected rate cuts into year end gain slightly (Dec at -54.1bp vs. -53.5bp pre-data)..
| Expiry | Total Calls | Total Puts | Total | Nearest ATM Strike (Total C/P) |
| Sep 30Y | 238,029 | 410,870 | 648,899 | 114.0 (19,298C, 17,299P; 36,597 total) |
| USU5 114-19 | 114.5 (4,987C, 7,174P; 12,161 total) | |||
| 115.0 (15,127C, 10,333P; 25,460 total) | ||||
| Sep 10Y | 1,211,374 | 1,128,850 | 2,340,224 | 111.75 (27,678C, 25,002P; 52,680 total) |
| TYU5 111-29 | 112.0 (183,217C, 50,266P; 233,483 total) | |||
| 112.25 (48,525C, 14,654P; 63,179 total) | ||||
| Sep 5Y | 432,963 | 498,007 | 930,970 | 108.5 (34,847C, 72,272P; 107,119 total) |
| FVU5 108-25 | 108.7 (27,900C, 29,294P; 57,194 total) | |||
| 109.0 (53,431C, 27,968P; 81,399 total) | ||||
| Sep 2Y | 174,023 | 154,852 | 328,875 | 103.62 (7,394C, 16,840P; 24,234 total) |
| 103-26.75 | 103.75 (14,113C, 31,388P; 45,501 total) | |||
| 103.88 (11,457C, 3,581P; 15,038 total) |
FED: July Minutes Preview: Eyed For Cut Support
The minutes to the July FOMC meeting (out at 2pm ET) will set the stage to some degree for this weekend's Jackson Hole symposium. While it comes a little more "stale" than usual given Chair Powell's imminent update on the policy outlook Friday, and the fact that the meeting took place before the weak July payrolls report, we will be interested to see three things in particular:
- Whether there was any support for a July cut outside of Waller and Bowman, or even any serious discussion; additionally, any signalling of nascent support beyond Waller and Bowman for a September cut
- Commentary on the balance of risks to inflation/employment, and how much more information/time would be required for participants to reach conclusions on tariff impacts
- Discussion about balance sheet management strategy given potential for signs of reserve scarcity bubbling up as soon as September, following the lifting of the debt limit and Treasury's rebuilding of its cash pile
A few sell-side analysts' views below:
- BofA: "we are interested in how the committee was assessing the balance of risks as of July 31. Were other policymakers amendable to Waller and Bowman's arguments for a cut, even if they didn't dissent (or aren't voters this year)? And, how many FOMC participants were aligned with the very hawkish view presented by Powell at his presser?"
- Citi: "will likely highlight the divergence in Fed officials’ views on monetary policy at the July meeting. More hawkish Fed officials like Hammack, Logan, and Schmid likely sounded more concerned about upside risk to inflation while dovish officials like Waller and Bowman were in favor of a rate cut at the July meeting. Market reaction should be limited given Powell’s Jackson Hole speech"
- Goldman Sachs: "Given the two dissenting votes for a cut and the mixed inflation data recently, we will be looking for insight on how committee members were thinking about the balance of risks to the dual mandate at the meeting. Still, given the large downward revisions and miss to the July NFP print released a couple of days after, the minutes likely won’t reflect the most up-to-date thinking of committee members."
- Wrightson ICAP: "We’ll pay particular attention to the range of views expressed about the “supply versus demand” debate with respect to the recent slowdown in payroll employment"
