EU-RUSSIA: Kremlin-EU 'Reparations Loan' For Ukraine "Delusional"

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• "Spain is moving ahead with a plan to write-off €83.2 billion ($96.8 billion) of regional governments’ debt as part of broader political negotiations to bolster support for Prime Minister Pedro Sanchez."
• "The measure, which would apply to loans owed to the central government, “is historic” and will allow Spain’s 17 regions to “regain financial and political independence”, Budget Minister Maria Jesus Montero said at a press conference on Tuesday. The measure is part of the investiture agreement signed with Catalan separatist party ERC to elect Sanchez as premier in 2023 and will need parliamentary approval."
• "The government has said that, if approved by parliament, the move won’t affect the central administration’s debt levels. Madrid had originally announced the plan in February"

On the last bullet point, current central government debt would be unaffected because the E83bln transfer from the central to regional government's has already been carried out (and thus, is already "accounted for" in Spain's fiscal/issuance plans). The aforementioned plan to write-off the debt would essentially transform this E83bln transfer into a subsidy (rather than a loan). As such, the move could in theory affect future debt levels, relative to the counterfactual of the regional government debt having been paid back.

• Reoffer: 98.972 to yield 4.8786%
• Spread set earlier at 4.50% Mar-35 Gilt +8.25bp (guidance was +8.25/+8.75bps)
• Size: GBP14bln  (MNI expected GBP8-12bln with risks skewed to the higher end given the large book size)
• Books closed in excess of GBP141bln (inc JLM interest of GBP12bln - second largest ever for a gilt)
• Hedge ratio: 100% vs 4.50% Mar-35 gilt (GB00BT7J0027). Spot ref 97.76 / 4.7961%.
• Maturity: 22 October 2035
• Settlement:  3 September 2025 (T+1)
• Coupon: 4.750% SA, ACT/ACT, long 1st to 22 April 2026
• Benchmark:  4.50% Mar-35 Gilt (ISIN: GB00BT7J0027)
• ISIN: GB00BTXS1K06
• Bookrunners: HSBC / J.P. Morgan (DM/B&D) / Lloyds / Morgan Stanley / NatWest / UBS
• Timing: TOE 12:18BST. FTT immediately

From market source and MNI colour

• +5,200 TYZ5 112-04, buy through 112-03.5 post time offer at 0659:37ET, DV01 $340,000.
• The 10Y contract trades 112-04 last (-12).