BONDS: MT/LT OAT Results In Focus Amid Weak Global Long-end Demand

Today’s EGB issuance calendar features short-end supply from Spain and mid/long-end supply from France. The results of the OAT sale will be interesting, with global demand for long-end debt seemingly faltering in recent weeks amid high policy uncertainty, fears of structurally higher inflation and fiscal pressures. On the other hand, demand for short-end paper has held up well.

• In the EGB space, yesterday’s 5-year syndicated launch of the 2.70% Oct-30 BTP saw very strong order books of E120bln for the E12bln sold. Demand at Tuesday’s 1.70% Jun-27 Schatz auction was also stronger than the May re-opening.
• On the other hand, Monday’s short 30-year 3.375% Nov-42 EU-bond auction saw a low bid-to-cover ratio of 1.12x. However, it’s worth caveating that this was the first re-opening since 2023 (and also the first non-syndicated re-opening since the bond was launched).
• In the US, May’s coupon auctions saw strong sales at the short-end/belly contrasted with tails at the long-end. The 2- through 10-year maturity sales all traded through, but the 20- and 30-year sales tailed (with the former particularly weak).
• Finally in APAC, JGBs have been the primary focus. The poor 30-year auction overnight follows weak results at the 20- and 40-year sales in recent weeks. JGBs nonetheless rallied following today’s auction, which some have attributed to a combination short covering and relief that the long-end supply calendar is clear until the 20-year sale on June 24.
• Elsewhere, South Korea also saw a soft 30-year KTB auction yesterday, in contrast to today’s 4-year NZGB sale in New Zealand, which registered the second highest bid-to-cover ratio since the bond's introduction in 2018.