POWER: Fingrid Confirms 13 November Start for Aurora Power Link

BOE money and credit data for August came in broadly in line with expectations, though there were slight drops in secured lending and mortgage approvals. Mortgage rates fell due to the August rate cut, though the bar for future base rate cuts appears high. M4 money supply increased on the year at a faster rate than in July.

• Despite steady and in-line mortgage approvals data (64.7k vs 64.6k cons, 65.4k July), net lending on dwellings came in slightly below expectations at GBP4.31bn (vs 4.8bn cons, 4.52bn July).
• Likely due in part to the August rate cut, quoted mortgage rates fell across the maturity profile, with 2y, 3y and 5y 75% LTV fixed rates all sitting between 4.12-4.14%. As households assess refinancing conditions, this drop will be welcome. Those refinancing from a 2y fixed rate two years ago would now see a c.2ppt lower interest rate for the same mortgage, however the passthrough of previous rate cuts is not yet complete for those on longer mortgage terms.
• In March, we saw frontloading of home sales ahead of the stamp duty changes, though given the lagged nature of housing data it's difficult to assess whether these figures have returned to normal levels. Given today's release, mortgage approvals and secured lending seem to be showing continued strength despite small dips in lending.
• Also in the release, M4 money supply rose to 0.4% M/M, 3.4% Y/Y (vs 0.1% M/M, 2.9% Y/Y July).

The German curve is bull flatter, but trendline support in 5s30s remains intact for now. Yields are 1 to 3bps lower across the cure, with 5s30s down 1.5bps at 97.7bps. Trendline support resides at 95.7bps today.

• This morning’s headline flow has been relatively light, but markets have been digesting ongoing Russia/Ukraine tensions, increased US government shutdown risks and semi-core/peripheral EGB ratings action since Friday’s close.
• Bund futures are +19 ticks at 128.45, off session highs of 128.57. Resistance at the 20-day EMA (128.45) has been pierced, exposing the Sep 17 high at 129.13.
• 10-year EGB spreads to Bunds are biased up to 1bp tighter with the exception of OATs. Diverging ratings action are playing a part. 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. European equities are off session highs, but remain up 0.35% today.
• In data, Spanish flash September core HICP was a little softer-than-expected, but had a limited market impact. Eurozone September sentiment was a touch above consensus at 95.5 (vs 95.3 cons and prior).
• ECB’s Makhlouf suggested the bank was “near the bottom” of its easing cycle. These were Makhlouf’s first comments since the September decision. Overall, we’d say they are broadly in line with the Governing Council median. ECB Chief Economist Lane is scheduled to speak at 1300BST.

Figure 1: German 5s30s Curve

15:00 ET 20:00 BST, President Donald Trump will meet Senate Majority Leader John Thune (R-SD), House Speaker Mike Johnson (R-LA), Senate Minority Leader Chuck Schumer (D-NY), and House Minority Leader Hakeem Jeffries (D-NY) at the White House in a last-ditch attempt to avert a government shutdown at 00:01 ET 05:01 BST on Oct. 1. 

• While the meeting keeps the possibility of a deal open, neither Schumer nor Thune has indicated flexibility. Moreover, it is unclear if Trump intends to propose a deal or press Democrats to accept the GOP funding package. Schumer told NBC if Trump is going to "just yell at Democrats... We won’t get anything done.”
• Thune said, “Democrats can either vote for [the House-passed 'clean' CR] or they can choose a completely avoidable shutdown.” Thune's advocacy for a clean CR is not unusual, but it is backed by an OMB memo threatening mass federal worker layoffs, hardening Democrats' resolve.
• The long-shot route to avoiding a shutdown is a deal on extending Obamacare subsidies in the coming weeks, allowing Schumer to supply seven Democratic votes to the CR. Pollster G. Elliot Morris noted the OBBB’s healthcare provisions are “underwater by 20-30 points,” and slightly more voters would blame the GOP for a shutdown, appearing to validate Schumer's decision to dig in on healthcare.
• According to Polymarket, the implied probability of a shutdown edged back up toward 70%, reversing a slight drop on news of the meeting.

Figure 1: Government Shutdown by October 1

Source: Polymarket