EUROZONE ISSUANCE: EGB Supply - W/C 9 June, 2025

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).

• 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)

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.”