US CREDIT UPDATE: Honda (HNDA)to Buy LG Battery Assets in Ohio for $2.9 Billion

• SX5E (20th Mar) 6000/6300cs 1x2, bought for 24 in 5k (5kx10k).
• SX5E (16th jan) 5000p, (20th feb) 5000p, (20th mar) 5000p, trades as a Put Fly for -7 in 3k.

Moody’s upgraded Italy’s credit rating to Baa2 (Outlook Stable) on Friday, in line with our expectations. Further positive ratings action is possible next year, contingent on “continued fiscal consolidation resulting from further improvements in the quality of revenue and spending” and “faster progress in addressing structural challenges related to the labour market and innovation capacity, together with stronger private investment than we currently assume”

• We’ve previously argued that growth dynamics, rather than primary balance consolidation, presents the main risk to the Italian fiscal/ratings outlook. Worse-than-expected growth outturns may limit narrowing momentum in BTP/XXX spreads in the coming years.
• Analysts expect a cyclical rebound in Italian growth, from 0.5% Y/Y in 2025 to 0.7% in 2026 and 0.9% in 2027. These are broadly in line with the EC’s latest projections (0.8% in both 2026 and 2027).
• Private consumption is expected to be supported by low unemployment rates and positive real wage growth. Meanwhile, non-residential investment growth should continue to be aided by EU RRP disbursements.
• The key cyclical questions ahead will be if middle-class tax cuts announced in the 2026 budget spur additional consumption, and whether private investment can fill the gap left by RRP funds once that programme ends.
• Meanwhile, the outlook for potential output remains bleak. Although employment and hours worked have rebounded solidly post covid, sluggish growth metrics have implied poor productivity outturns. Meanwhile, Italy still has the highest inactivity rate across the Eurozone. Coupled with an ageing population, this presents a key structural headwind that government policy will need to address. 

The latest December'25 to March'26 Tsy quarterly futures roll volumes are outlined below, percentage complete running at/near 50% ahead this Friday's "First Notice" date: Current roll details:

• TUZ5/TUH6 appr 159,500 from -6.25 to -5.87, -6.0 last; 50% complete
• FVZ5/FVH6 appr 259,000 from -3.0 to -2.75, -3.0 last; 52% complete
• TYZ5/TYH6 appr 222,600 from 1.5 to 2.0, 1.5 last; 49% complete
• UXYZ5/UXYH6 191,700 from 4.25 to 4.75, 4.25 last; 44% complete
• USZ5/USH6 54,200 from 11.75 to 12.75, 12.0 last; 47% complete
• WNZ5/WNH6 appr 108,300 from 9.75 to 10.25, 10.0 last; 46% complete
• Reminder, Dec'25 futures don't expire until next month: 10s, 30s and Ultras on December 19, 2s and 5s on December 31. Meanwhile, Dec'25 Tsy options expired last Friday, November 21.