FRANCE AUCTION RESULTS: MT OAT Results

ING remain bearish on longer-dated rates, but note that thinner summer liquidity could give rise to yield volatility in either direction:

• “Over the past few weeks, markets have largely treated tariff headlines as background noise, but with the August 1 deadline approaching, we may start to see more volatility”.
• “And with market liquidity thinning during the summer, any such moves may be amplified. The sharp decline in 30Y yields on Monday, for example, was difficult to justify from the news flow alone”.
• “The very long end of global yield curves will remain a source of volatility as the themes driving those moves are likely to linger. In Japan, there were elections over the weekend, but the fiscal outlook remains uncertain. Also, in the UK and numerous EU countries, government finances are at risk. Meanwhile, in the US, the independence of the Fed is being challenged"..."part of the rally in long-dated bonds on Monday may therefore be linked to headlines about Treasury Secretary Scott Bessent’s opposition to firing Fed Chair Jerome Powell".
• "All these drivers are unlikely to disappear overnight, which is a reason to remain more bearish on longer-dated rates”.

ERZ5 98.25/98.375/98.50/98.625 call condor, paper sells for 2.5 in 3.75k

• The DMO will kick off issuance for the week on Tuesday with GBP1.7bln nominal of the 1.125% Sep-35 linker on offer via auction.
• Linkers continue to remain in demand and we have not seen a conventional auction since August 2024 with a bid-to-cover below 3x.
• This on-the-run 10-year linker was launched in January for GBP1.5bln nominal and this will be the fifth auction (matching the auction size seen in June of GBP1.7bln nominal).
• We would expect another strong auction this week.
• The 1.125% Sep-35 linker will be on offer again on 19 August.