OAT: Looking Through Le Maire’s Latest Pledge To Cut Public Spending
OATs look through this morning’s FT interview with French Finance Minister Le Maire which saw him promise “a renewed push to cut public spending on everything from energy subsidies to real estate tax credits as the government seeks to rebuild its credibility with credit rating agencies.”
- Le Maire went on to note that that the recent rating decision by S&P (when the country avoided a downgrade, as it’s AA; Outlook Negative status was affirmed) “is an incentive to do more and to do better. We need to stick to our debt reduction program and to cut public expenditures.”
- OAT futures have benefited from the light richening observed in core global FI markets in recent trade, but still sit a touch below yesterday’s settlement levels owing to spill over derived from the late NY cheapening in U.S. Tsys.
- Cash OATs run little changed to 1bp cheaper, with the wings of the curve outperforming.
- The 10-Year OAT/Bund spread is little changed on the day, operating around multi-week tights near the 52bp mark.
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BUNDS: Brisk Corporate Issuance & BTP Dynamics Eyed Early On
A brisk pace of €IG corporate issuance to start the week keeps the rally from session lows in Bunds in check (previously outlined technical support at the 20-day EMA in the futures contract held to the tick), after gyrations surrounding spread plays in BTPs post Fitch’s sovereign credit rating affirmation drove price action early on. The Bund curve bear steepens on the day, with the major benchmarks running 2.5-4.0bp cheaper, while the major German futures contracts all sit comfortably cheaper on the day, albeit off session cheaps.
EQUITIES: Rally In Financials Drives Afternoon Bid In China
Mainland Chinese & Hong Kong equities firmed notably during the second half of Monday’s session.
- Financials were touted as the driver of the move, with Chinese media outlets flagging news that an upcoming Shanghai Stock Exchange seminar that will touch on boosting the valuation of the country’s financial sector.
- That left the CSI 300 +1.6% better off at the close, with the Hang Seng up a similar amount in late dealing.
- Elsewhere, wires pointed to a social media post from the wife of a well-known fund manager, who outlined hopes for market stabilisation led by fresh gains in SOEs.
- Meanwhile, TenCent outperformed the broader tech sector for much of the day ahead of the company’s quarterly earnings report (due Wednesday).
- When it comes to cross-border flows, the Northbound legs of the Hong Kong-China Stock Connect schemes extended the recent run of (relatively contained) net daily inflows, with ~CNY4.1bn of net purchases registered via those channels on Monday.
JAPAN: Kishida-Timing Of Election Depends On 'Various Future Conditions': Jiji
Wires reporting Jiji Press relaying comments from Japanese Prime Minister Fumio Kishida stating that the "Timing of dissolving parliament to seek [a] public mandate would depend on various future conditions." Earlier today Japan Times also reported that Kishida could be considering calling a snap election following the G7 leaders summit taking place in Hiroshima at the end of the week.
- Any action now would be a significant gamble by Kishida, given that the next general election is not due until October 2025 at the latest. Before that, Kishida faces re-election as head of the governing conservative Liberal Democratic Party.
- Japan Times reports that Kishida could be considering pushing the election up based on a recovery of his approval ratings to around 50% and relatively strong performances for the LDP in recent by-elections. It also notes the sizeable risk of calling an election based solely on these factors.
