EGBS: German Curve Unwinding Recent Bear Flattening, Several Risks Next Week
Dec-12 10:33
The German curve continues to gradually unwind recent bear flattening, with 5s30s 1bp steeper at 99.5bps. Next week’s regional calendar is heavy. The front-end is likely to be influenced by December flash PMIs and the ECB decision, while the belly/long-end will be looking for cues from 2026 sovereign issuance plans - especially from Germany.
- German yields are +0.5 to +2bps higher across the curve, with market moving headline flow relatively sparse this morning.
- Bund futures are -12 ticks at 127.46. Although off Wednesday’s 127.05 low, technical conditions in Bund remain bearish. Initial resistance is the Dec 8 high at 128.08.
- 10-year EGB spreads to Bunds are biased up to 1bp narrower, aided by an extension higher in European equity futures. The 10-year BTP/Bund spread is consolidating back below the 70bp figure. Given the extent of narrowing since 2022, the bar to further tightening next year has likely been raised. However, the combination of improving Italian fiscal fundamentals and domestic political stability continues to increase the attractiveness of BTPs for domestic and foreign investors.
- Final November HICP inflation readings from Germany, France and Spain did not bring many surprises. The upward revision in Spain was due to rounding (3.16% Y/Y vs 3.1% flash).
Figure 1: German 5s30s Curve (Source: Bloomberg Finance L.P)
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GILT SYNDICATION: 1.75% Sep-38 linker: Final terms
Nov-12 10:33
- Size: GBP4.25bln (MNI expected GBP GBP4.5-5.5bln)
- So a little below our expected range despite the strong books.
- Spread set earlier at 1.125% Nov-37 linker (GB00B1L6W962) +10.50bps (guidance was +10.50 / +10.75bps)
- Books in excess of GBP69bln pre-rec (inc JLM interest of GBP3.9bln)
- ISIN: GB00BMY62Z61
- Settlement Date: 13-November-2025 (T+1)
- JLMs: GSIB (B&D/DM) / JPM / NOMURA / SANTANDER
- Timing: Allocations to follow
Source: Market source and MNI colour
BONDS: German 10s/30s Block trades
Nov-12 10:32
Perfectly Weighted German Curve trade, suggest a steepener:
- RXZ5 ~3.28k bought for 129.09.
- UBZ5 ~1.43k sold at 115.16.
FOREX: USDJPY Uptrend Extends, Ignoring Verbal Warnings
Nov-12 10:32
- The Japanese yen has weakened again Wednesday, with USDJPY’s move higher notable given further FX jawboning from Finance Minister Katayama, who reiterated authorities are closely watching FX moves with a high sense of urgency.
- This has led USDJPY to erase the ADP-driven losses from Tuesday, and then accelerate through 154.50, a level that had been holding across early November. Furthermore, 154.80 has also been cleared, placing the pair at the highest level since February. This puts sights on 155.35, a Fibonacci projection. A number of cross-Yen also stand at noteworthy levels, CHFJPY for example sees fresh all-time highs at 193.82.
- EURCHF (-0.23%) sees further downside pressure as a function of the looming US-Swiss trade deal, to session lows of 0.9246 at typing. This keeps the extremely significant support cluster between 0.9206-22 for EURCHF in high focus for those looking for a break to the lowest levels since the peg removal in 2015. Meanwhile USDCHF (-0.15%) has tracked further back below the 0.8000 handle.
- Internal criticism from a senior Labour party member weighed on GBP this morning, followed by a sudden move lower that may have been flow or fix related. On net, GBPUSD sits at 1.3118, with first support and the bear trigger for the pair at 1.3010, the Nov 4 and 5 lows.
- US MBA Mortgage applications as well as Canada building permits highlight the data calendar today. A set of Fed speakers is scheduled for today, while ECB's de Guindos and BoE's Pill are also set to speak but likely won't move the needle. The US government is expected to reopen tomorrow if the House expectedly signs the deal on that today.
