FRANCE AUCTION PREVIEW: MT OAT Auction (1/2)
Feb-20 09:07
This morning, France will hold its second medium-term OAT auction of the year. On offer will be a combined E11.5-13.5bln of the new 2.40% Sep-28 OAT, the 0% Nov-29 OAT and the on-the-run 2.75% Feb-30 OAT.
- The size target range represents a step up in size - the E13.5bln at the top of the target range would represent another record for a French auction if achieved. Previously the largest auction has been E13.0bln (which we have seen in the other three French auctions this year).
- Note that this also follows the large syndications (including the record E10bln for the long 15-year in January and the E8.0bln 30-year on 12 February- albeit with the latter matching last year's 30-year size).
- The previous MT OAT auction passed smoothly, and generally since June 2024 MT OAT auctions have been relatively well digested with the top of the target ranges sold and lowest accepted prices generally exceeding prevailing pre-auction mid prices.
- The ongoing political and fiscal uncertainty continues to be watched by markets with most recently the government having survived three no-confidence votes, and forced through the Social Security Financing Bill (PLFSS) without a vote in the Assembly using Art. 49.3 of the constitution (for the fourth time).
- The 10-year OAT-Bund spread reached its multi-year widest levels at the end of last year and has tightened since, but failed to break below 70bps and continues to be limited by medium-term fiscal/political risks. At writing the spread is trading around 72.5bp.
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Historical bullets
GILT SYNDICATION: 4.375% Jan-40 gilt: Books open
Jan-21 09:04
- Guidance: 4.25% Sep-39 gilt +4.00/+4.25bps
- Size: GBP Benchmark (MNI expect GBP5.0-6.5bln)
- Expected Settlement Date: 22-January-2025 (T+1)
- ISIN: GB00BQC82D08
- Joint Leads: DB (B&D / DM) / JPM / MS / Nomura / RBC CM
- Timing: Books open, today’s business
From market source
EGBS: Spreads To Bunds Marginally Wider
Jan-21 08:58
Trump’s apparent focus on imposing tariffs on Mexico & Canada in the coming weeks helps promote some modest EGB spread widening to Bunds today, although the major 10-Year cross-market differentials are within 1bp of yesterday’s closing level.
- Bund futures have pulled back from overnight highs, limiting the spread widening as the risk-off moves fade from extremes.
- 10-Year BTP/Bunds closed below 110bp, with cycle closing lows located at 106.4bp.
- Meanwhile, 10-Year OAT/Bunds last ~77.5bp, with French political and fiscal risks helping keep that spread above 75bp.
- Supply pressure is set to come via the French and Lithuanian syndications, with German green supply also scheduled.
USD: EUR and the Pound are testing their intraday lows
Jan-21 08:50
- The EUR and the Pound are falling back to where they fell Overnight post Trump's Tariffs headline, both EURUSD and Cable are back to their overnight intraday lows.
- Not Yet seeing any broader moves versus G10s at least.
- Small support in Cable comes at 1.2222, and a push all the way down to ~1.2186 would reverse Yesterday's WSJ story on Tariffs.
- EURUSD would need to drift to 1.0320 to reverse that move.
