BONDS: EGBs-GILTS CASH CLOSE: Week Closes With Notable Bear Steepening
Jul-11 16:09
Weakness across core FI Friday cemented a bear steepening move for the week as a whole.
- For yet another session this week, there were few overt macro / headline drivers of weakness, with the broader theme of fiscal concerns continuing to weigh on Bunds and Gilts alike.
- After the US overnight announced 35% tariffs on Canada, there was expectation of the EU rate being revealed Friday, though market participants appeared to largely shrug this off.
- Gilts saw little market reaction to softer-than-expected May GDP data, with upward revisions dulling any dovish impulse.
- ECB's Schnabel was typically hawkish, noting that the bar for another cut is very high.
- Both the German and UK curves bear steepened. 10Y Bund saw its highest daily close since March 31, with 30Y since 2011.
- For the week as a whole, both the UK and German curves bear steepened: for the UK, 2Y +0.4bp, 10Y +6.8bp; Germany underperformed: 2Y +8.4bp, 10Y +11.8bp.
- Fitch is scheduled to review Germany's rating after Friday's close (AAA; Outlook Stable). Next week's European calendar highlights are UK-centric, with CPI and labour market data and BOE's Bailey delivering the Mansion House speech.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 1bps at 1.9%, 5-Yr is up 1.5bps at 2.288%, 10-Yr is up 2bps at 2.725%, and 30-Yr is up 2.4bps at 3.227%.
- UK: The 2-Yr yield is unchanged at 3.856%, 5-Yr is up 1.7bps at 4.043%, 10-Yr is up 2.7bps at 4.622%, and 30-Yr is up 2.7bps at 5.433%.
- Italian BTP spread down 0.8bps at 84.6bps / French OAT down 0.6bps at 68.8bps
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SECURITY: Pentagon Launches Review Into Scrapping AUKUS Submarine Deal
Jun-11 16:09
The Financial Times reporting that the US Department of Defense, led by Under Secretary of Defence for Policy Elbridge Colby, "has launched a review of the 2021 Aukus submarine deal with the UK and Australia to determine if the US should scrap the project."
- FT notes: "Ending the submarine and advanced technology development pact would destroy a crucial pillar of security co-operation between the allies, at a time of heightened tension with China. The review has triggered anxiety in London and Canberra."
- Colby told the Sydney Morning Herald in August last year: “Even in the last couple of months, I would say that my views on AUKUS have become a bit more receptive. I would describe myself as maybe an AUKUS agnostic. I’m not an atheist, which is to say I’m prepared to be convinced in the existence of the pot of gold at the end of the rainbow, but I have not seen the weight of compelling evidence thus far.”
- Breaking Defence reported yesterday that the UK government announced on Tuesday, "a more than $8 billion investment for two major production sites set to build and deliver “up to” 12 nuclear-powered attack submarines (SSNs) under the trilateral AUKUS program."
- The Guardian notes that UK Prime Minister Keir Starmer said, following the release of a Strategic Defence Review last week, that the Aukus submarines are critical for the UK’s defence, and declaring "a landmark shift in Britain’s deterrence and defence..."
PIPELINE: Corporate Bond Update: $4.2B Brown & Brown 6pt Launched
Jun-11 15:58
- Date $MM Issuer (Priced *, Launch #)
- 06/11 $4.2B #Brown & Brown 6pt: $400M 1.5Y +65, $500M 3Y +80, $800M 5Y +92, $500M 7Y +107, $1B 10Y +117, $1B 30Y +135
- 06/11 $Benchmark Citadel Securities 5Y +180a, 10Y +200a
- 06/11 $Benchmark Export Development Canada (EDC) 5Y SOFR+45a
- 06/11 $700M Unisys 5.5NC2.5
MNI EXCLUSIVE: Interview with ADP Chief Economist Nela Richardson
Jun-11 15:56
MNI interviews ADP chief economist Nela Richardson on the outlook for employment and Fed policy - On MNI Policy MainWire now, for more details please contact sales@marketnews.com
