EGBS: Little Impact In Bunds From Soft Country-level Inflation Readings
Modest downside inflation risks stemming from this morning’s country-level flash readings have not provided much impulse to Bund futures, which are -15 ticks at 128.91. Gains in Bund futures since November 20 appear corrective, though the contract has traded through the 50-day EMA and is holding on to the bulk of its latest gains for now. Initial resistance is the November 26 high at 129.21.
- Note that market activity may be limited by the ongoing issues on the CME, with UST and S&P500 futures (amongst others) currently halted.
- Roll activity is now being seen in Eurex futures, with the Bund calendar spread active overnight and this morning.
- German yields are up to 1bp higher. The 5s30s curve is at 103bps, off Monday’s 106.7bp multi-week high.
- 10-year EGB spreads to Bunds are within 0.5bps of yesterday’s closing levels, with spread ranges narrow since Wednesday. Downside in the BTP/Bund and OAT/Bund spreads continue to be contained by the 70bp figure for now.
- This morning, French and Italian flash HICP printed below consensus, while there are slight downside risks to the German national print at 1300GMT.
- Today’s heavy data calendar has also seen final Q3 GDP readings from France (flash confirmed at 0.5%) and Italy (revised up a tenth to 0.1%), alongside the ECB’s consumer expectations survey (long-term inflation expectations steady).
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UK DATA: BOE Lending Data on the Stronger Side of Expectations
BOE money and credit data for September look on the stronger side of expectations and are broadly in line with previous post-COVID Septembers. Both mortgage approvals and secured lending came in higher than August. Also in the release, M4 money supply increased at a faster rate than in August.
- New mortgage approvals came in at 65.9k, above consensus of 64.0k and up from August's upwardly revised 65.0k. Readings broadly in line with this level have been seen for around a year (with the exception of the volatility around the stamp duty changes).
- Net lending on dwellings also increased, coming in at GBP5.49bln vs 4.31bln in August.
- The key takeaway on the mortgage rates is that those remortgaging from a 5-year rate will still see a big increase in payments, those remortgaging from a 2-year rate will see a fall and those remortgaging from a 3-year rate will see payments broadly in line with their previous terms.
- The average fixed rate on a 3-year (75% LTV) mortgage rose slightly to 4.19%, that it is now below the same rate 3 years ago (4.45%). This is the first time it has been below the 3-year lagged rate since early 2022 so those re-mortgaging from a 3-year rate on to another 3-year rate will see lower mortgage payments.
- Net consumer credit was almost exactly in line with consensus, at GBP1.49bln vs 1.5bln cons, though down from 1.69bln in August.
- Also in the release, M4 money supply growth rose to 0.6% M/M, 3.6% Y/Y (vs 0.4% M/M, 3.4% Y/Y August).
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GERMAN AUCTION RESULTS: 2.60% Aug-35 Bund
| 2.60% Aug-35 Bund | Previous | |
| ISIN | DE000BU2Z056 | |
| Total sold | E4.5bln | E5bln |
| Allotted | E3.378bln | E3.807bln |
| Avg yield | 2.62% | 2.72% |
| Bid-to-offer | 1.01x | 0.94x |
| Bid-to-cover | 1.34x | 1.23x |
| Avg Price | 99.81 | 98.93 |
| Low Price | 99.81 | 98.92 |
| Pre-auction mid | 99.766 | 98.896 |
| Previous date | 01-Oct-25 |
