EUROPEAN INFLATION: Eurozone July HICP Marginally Above Consensus

• MNI: EUROZONE MAY UNEMPLOYMENT RATE 6.3%

The Eurozone unemployment rate unexpectedly ticked up to 6.3% in May but remains close to the 6.2% cycle lows seen in April (consensus was for an unchanged print).

This morning, Germany will open its new on-the-run 10-year 2.60% Aug-35 Bund (ISIN: DE000BU2Z056) for E6bln.

• The size of this auction was increased by E1bln from E5bln in the Q3 calendar update. The E6bln auction size is the largest for a non-Schatz German auction since 2011 (and the largest of any German auction since September 2023). This is also the only E6bln German auction scheduled for Q3.
• Demand metrics in German auctions have recovered recently after a phase of weakness towards the beginning of Q2, and that also applies to the 10-year segment. At the last June 11 auction of the (previous on-the-run) 2.50% Feb-35 Bund, the bid-to cover came in at 2.69x and the bid-to-offer at 2.09x - a significant improvement from the 1.38x bid-to-cover / 1.06x bid-to-offer seen at a weak auction in late April. These metrics compare to a 1.38x - 2.84x range for bid-to-covers and a 1.06x - 2.17x range for bid-to-offers seen in German 10y auctions this year.
• At the last two 10y auctions (Jun 11, May 21), the secondary market mid-price has also been below the lowest accepted price again - contrary to the two 10y auctions ahead of that.
• Germany last week announced its 2025 budget details and 2026-29 broad financial plans, with the resulting issuance ramp-up, on balance, being perceived as quicker than expected by analysts previously. For our view on the events, see here.
• The next German auction will be E5bln of the new Oct-30 Bobl (ISIN: DE000BU25059) on June 8, while the 2.60% Aug-35 Bund will be re-opened on July 23, also for E5bln.
• Timing: Results will be available shortly after the bidding window closes at 10:30GMT / 11:30CET.