EU HEALTHCARE: Healthcare: Week in Review

• Reoffer: 99.761 to yield 2.768%
• Size: E12bln (MNI expected E7-10bln)
• Books closed in excess of E120bln (incl. E5.3bln JLM interest)
• Spread: 2.95% Jul-30 +8bps (guidance was +10bps area)
• Hedge Ratio: 103% vs 2.95% Jul-30 BTP (spot ref 101.315 / 2.688%)
• Maturity: 1 October 2030
• Coupon: 2.70%, short first
• ISIN: IT0005654642
• Timing: TOE 14:21BST / 15:21CET

• Reoffer: 103.866 to yield 3.692%
• Size: E5bln WNG
• Spread: 0.95% Mar-37 +6bps (guidance was +9bps area)
• Hedge Ratio: 125% vs 0.95% Mar-37 BTP (spot ref 74.81 / 3.632%)
• Books closed in excess of E94bln (incl. E3.8bln JLM interest)
• ISIN: IT0005596470
• Timing: TOE 14:19BST / 15:19CET

• Settlement: 11 June 2025 (T+5)
• Bookrunners: Barclays (DM/B&D) / BNPP / BofA / CACIB / Santander / Societe Generale

From market source

The 10-Year gilt/Bund spread is back below 210bp, with gilts outperforming Bunds as Tsys rally in the wake of the ADP employment data and Trump’s latest critique of Fed Chair Powell.

• The spread failed to test the April closing highs (218.8bp) in recent weeks, although the short-term fundamental and technical outlooks suggest there is a risk of further widening.
• The short-term technical outlook for Bund futures is a little more constructive than that for gilts.
• 10-Year gilt yields remain stuck in the wedge drawn off the longer-term uptrend (beginning at the December ’21 lows) and the short run downtrend drawn off the ’25 high. The benchmark last trades at 4.63%, with the boundaries of the wedge located at 4.500% & 4.788% today.
• Ongoing fiscal fragility in the UK keeps focus on the upper end of the recent range, although some speculation surrounding (a modest degree of) fiscal tightening has prevented 10-Year gilt yields from moving towards year-to-date highs (4.921%).
• Meanwhile, the market seems more at ease with the idea of fiscal loosening in Germany than it did around the time of the “whatever it takes” declaration made in early March. Two factors seem to be at play here, some believe that the size of the loosening will comfortably undershoot initial estimates & related debt issuance has not been immediate, giving the market some breathing room.
• Note that the relatively elevated gilt beta to moves in U.S. Tsys (compared to Bunds) and the complex macro environment evident at present add further layers of complexity to the outlook for the spread.

Fig. 1: UK 10-Year Gilt Yield (%)

Source: MNI - Market News/Bloomberg

Some highlights from the S&P Global report on Canada Services PMI (link), which showed a broad improvement vs April (45.6 vs 41.5 prior): 

• "Canada’s service sector contracted again during May in line with ongoing uncertainty related to tariffs and the broader macroeconomic environment."
• "Both activity and new business fell markedly, albeit at reduced rates as confidence showed some improvement compared to earlier in the year. "
• "Marginal jobs growth was also registered, which helped explain a further contraction in backlogs of work. "
• "Latest data indicated an acceleration in input price inflation and the biggest rise in output charges for a year. Tariffs remained a source of price pressures, according to service providers. "
• "Tariffs also had a noticeable effect on international sales, with new export business declining sharply again in May (albeit to the weakest degree since January)."
• "Confidence amongst service providers improved during May to its highest level since January. There were hopes that the business environment will be more stable in a year’s time and will lead to some organic business growth."