EU AUTOMOTIVE: EXOR: IPT

RXX5 130/131.5cs, bought for 11.5 in ~2.5k.

Sovereign rating & fiscal divergence feed into EGB spreads again this morning.

• 10-Year OATs ~0.5bp wider vs. Bunds, while Iberians & BTPs trade 0.5-1.0bp tighter.
• As a result, the 10-Year SPGB/OAT/PGB fly is ~1bp off cycle closing lows, last -67bp.
• France’s sovereign rating outlook was moved to negative at Scope Ratings on Friday, while Spain received one-notch upgrades at both Fitch & Moody’s (this generally met wider expectations).
• Meanwhile, French PM Lecornu pushed back against some of the Socialist Party’s preferences when it comes to fiscal reform (an outright wealth tax & reopening old pension agreements). Lecornu also pointed to a deficit/GDP ratio of 4.7% for ’26, very close to former PM Bayrou’s 4.6% target. This backdrop underscores the idea that the current PM will face many of the same difficulties as his predecessors, keeping French political and fiscal risk elevated in the immediate term.
• Ahead of Friday’s ratings action J.P.Morgan noted that “Spain remains our favourite pick for a strategic overweight in the intra-EMU space given strong fundamentals and limited political/fiscal noise compared to larger peers”. They recommended switching an existing long 10-Year SPGB vs. BTP & Bund equal-weighted fly to a long 10-Year SPGB vs. OAT & Bund equal-weighted fly, given the French risks.

• As mentioned earlier given the bid in Bonds and US Treasuries, a drift lower in Yield, Market Participants will be looking for more upside risk into the Yen.
• The JPY has extended broader gains against the USD, GBP, and the EUR.
• The Moves in FX are a function of the Yields and in turn the Dollar, USD prints a fresh low against the GBP, CAD, CNH, CNY, ILS, CHF, CNH, CNY, and PHP.