EUROZONE ISSUANCE: EGB Supply - W/C 9 June, 2025
The ESM has issued an RFP for a syndicated transaction while the Netherlands, Germany, Finland, Portugal and Italy will look to hold auctions in the upcoming week. We pencil in estimated gross issuance for the week of E21.7bln (from E47.2bln this week).
For the full MNI Issuance, Redemption and Cash Flow Matrix click here.
- The ESM has sent an RfP for an upcoming transaction. We expect a syndication on Tuesday with a size of between E1-3bln. We don’t have a strong conviction surrounding the maturity that will be on offer.
- The Netherlands will kick auctions for the week off on Tuesday with E2.0-2.5bln of the on-the-run 10-year 2.50% Jul-35 DSL ISIN (NL0015002F72) on offer.
- Germany will also come to the market on Tuesday, looking to sell E4bln of the 2.40% Apr-30 Bobl ISIN (DE000BU25042).
- Finland will round off auctions on Tuesday with up to a combined E1.5bln of the 1.50% Sep-32 RFGB (ISIN: FI4000523238) and the 0.50% Apr-43 RFGB (ISIN: FI4000517677).
- Germany will return to the market on Wednesday with E3bln of the 10-year 2.50% Feb-35 Bund (ISIN: DE000BU2Z049) on offer.
- Portugal will look to hold an auction on Wednesday, with a combined E1.00-1.25bln of the 0.90% Oct-35 OT (ISIN: PTOTENOE0034) and the 3.625% Jun-54 OT (ISIN: PTOTE3OE0025) being on offer.
- Italy will conclude the week’s auction issuance on Thursday with a 3/7/15+ year BTP auction. We expect to see reopenings of the 3-year on-the-run 2.65% Jun-28 BTP (ISIN: IT0005641029) and the 7-year on-the-run 3.25% Jul-32 BTP (ISIN: IT0005647265). We don’t have a strong conviction surrounding which 15+ year BTP will be on offer alongside these. Details will be confirmed on Monday.
NOMINAL FLOWS: The week ahead sees a single E17.5bln German Schatz redemption. Coupon payments for the week total E0.8bln of which E0.5bln are German and E0.2bln are Slovakian. This leaves estimated net flows for the week at a positive E3.3bln, versus E2.8bln this week.
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BONDS: EGB-GILTS CASH CLOSE: Curves Bull Flatten Ahead Of BOE Tomorrow
The German and UK cash curves bull flattened Wednesday, with Bunds lightly outperforming Gilts.
- There was no obvious headline trigger for the bid that began mid-morning, but strength extended through the session as equities and oil/gas benchmarks moved away from highs.
- 10-year Bund yields ended the session down 6.5bps to 2.47%, with Gilts down 5.4bps to 4.46%.
- The space largely brushed aside a Reuters sources article detailing German defence spending plans, with the piece lacking clarity on whether the touted E60bln of additional spending is for 2025 alone or split across the current parliamentary term.
- Today’s LT OAT and 5-year Gilt auctions saw solid results.
- 10-year EGB spreads to Bunds tightened through the morning, but the moves partially unwound in the afternoon alongside continued equity weakness.
- Eurozone data (strong German factory orders, weak Italian retail sales and in-line Eurozone retail sales) were not market movers.
- Tomorrow’s focus is on the BOE decision. An outcome other than a 25bp cut would be surprising but there will be a number of things to watch: any changes to the guidance and the inflation / growth forecast changes, the vote split and the introduction of new scenarios. (MNI preview here).
OPTIONS: Larger FX Option Pipeline
- EUR/USD: May09 $1.1300(E1.3bln), $1.1375-85(E954mln), $1.1400-10(E1.1bln); May13 $1.1370-75(E1.7bln)
- USD/JPY: May09 Y141.00($1.3bln), Y145.00($1.9bln); May12 Y142.45-50($1.0bln), Y145.00($1.5bln)
- USD/CAD: May09 C$1.3700($1.2bln), C$1.3750($1.3bln), C$1.4170($1.0bln)
GERMANY: Border Control Order Risks Difficult Conversations For Merz w/Polish PM
Bild reports that Germany's Interior Minister Alexander Dobrindt has, on his first day in officee issued an order to halt all undocumented migrants at the country's external borders, even if they make claims for asylum. Bild: "In addition, Dobrindt – also today – revoked in writing a verbal instruction to the Federal Police from former Interior Minister Thomas de Maizière (71, CDU) from 2015. According to this instruction, "Third-country nationals without residence permits and who submit a request for asylum are to be permitted entry." Dobrindt has now stopped that."
- The order, intended to indicate that the 'grand coalition' gov't, headed by conservative Chancellor Friedrich Merz, will take a hard line on immigration, risks a tense meeting with Polish PM Donald Tusk for the new head of gov't in the hours ahead.
- Merz has sought to use his first full day in office to tout his commitment to European security with the Weimar Triangle alliance (Germany, France, Poland) leading the way.
- However, closing Germany's external border to undocumented migrants risks a rift with Poland, both on the issue of where those undocumented migrants end up and on the functioning of the internal market (given the importance of exports to Germany for Polish economy). Indeed, Politico reported earlier this week "“The current controls at the German-Polish border are already a problem for daily border traffic and the functioning of the EU internal market,” Poland’s chief diplomat in Berlin, Jan Tombiński,[said] “We therefore do not want to see a tightening of border controls.”
