EU CREDIT MACRO: EU Market Close

• +6,600 TUU5 103-30.5, buy through 103-30.38 post time offer at 1139:00ET, DV01 $244,000.
• The 2Y contract trades 103-31 last, +.25

• +25,000 FVU5 107.5/108.25/109 put flys, 12 vs. 109-07.5/0.14%
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• Finance minister Klingbeil last week presented the 2026 budget briefly after it was agreed on internally by the government and gave an update on the federal financial plan through 2029.
• The key takeaway from the announcement is that the government will face a significant task of consolidating its budgets starting 2027 and has limited plans yet on how to do so. Also on proclaimed structural reforms (bureaucracy reduction, social security reform), details are scant.
• Defense expenditure plans are largely unchanged vs previous, with the NATO quota to increase to 2.6% in 2026 and 3.5% in 2029 (excluding military-related infrastructure investment), while infrastructure investment from its related special fund is to focus on transport and digitization – with planned volumes to pick up next year and then remaining roughly stable through to 2029.
• Against that context, also note the recent MNI policy exclusive suggesting caution around the announced infrastructure figures.