POWER: Germany’s No-Bid Offshore Wind Auction Raises Subsidy Question

HSBC have raised their end-2025 10-Year Bund yield forecast to 2.45% (prev. 2.20%), and to 2.55% for end-2026 (prev. 2.00%).

• While they do not expect the ECB to cut again, they do warn that risks to their call lie more in the dovish direction than the hawkish side.
• Regarding swap spreads, they expect “less impact from QT next year, but Germany's bold plans for fiscal expansion could see an increase in Bund supply (although highlight the risks of a near-term underspend)”.
• Meanwhile, they see “the "rotation trade" away from U.S. assets having less influence over Bund spreads next year. They were cheap before the 2 April U.S. tariff announcement so some of the richening this caused can be seen as a correction, which we do not expect to be sustained”.
• Net, they “expect Bund-swap spreads to remain at current levels this year but start cheapening in 2026”.
• They also highlight that these “factors, plus the possibility of a higher term premium due to greater inflation volatility, also drive our forecast for continued steepening of the 10-/30-Year slope”.

• Secured Overnight Financing Rate (SOFR): 4.35% (-0.04), volume: $2.846T
• Broad General Collateral Rate (BGCR): 4.32% (-0.05), volume: $1.140T
• Tri-Party General Collateral Rate (TCR): 4.32% (-0.05), volume: $1.109T
• (rate, volume levels reflect prior session)

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