HUNGARY: Nagy Sees Short-Term Growth Driven by Consumption

This morning, Germany will hold its sixth Schatz auction of the year. On offer will be E5.0bln of the new 1.70% Jun-27 Schatz.

• The E5.0bln size is in line with the last Schatz launch on January 28.
• Recent Schatz auctions have passed mostly smoothly, with solid bid-to-covers (in a 2.09x to 3.46x range since August) and bid-to-offers (1.69x to 2.63x range since August). The low prices were above the secondary market mid-prices throughout 2024/5 before the February 18 Schatz auction saw them equal to each other, and then the low price was lower than the mid-price on March 11 - both auctions appeared to have not seen an adverse market reaction, however.
• Additionally, the last Schatz auction on April 1 appeared strong with the bid-to-cover at 3.46x (multi-year high), and the bid-to-offer at 2.63x.
• However outside of Schatz auctions, there have been some weak German auctions recently. Last week's Bobl auction was very soft, the 10-year Green Bund auction the week prior was also soft and last week's 30-year Bund auction was a little more successful but still disappointing relative to other recent auctions.
• Today's auction will therefore be watched more closely than usual.
• Ahead of the Easter holidays, Schatz positioning appeared increasingly long (see the MNI PI).
• The next German auction will be tomorrow's E4bln of the 2.50% Feb-35 Bund (ISIN: DE000BU2Z049), while the 1.70% Jun-27 Schatz will be reopened next on May 13, for E4.5bln.
• Timing: Results will be available shortly after the bidding window closes at 10:30GMT / 11:30CET.

SFRU6/H7 ~4.2K trades at 9.5, initiated by a seller to start.

ECB-dated OIS almost fully price another 25bp cut in June, following the dovish, growth-centric tone of last week’s decision/press conference. OIS almost price another three 25bp cuts this cycle (~71/72bps through Feb/March 2026), implying a terminal rate of just over 1.50%.

• MNI’s ECB review, published last week, is here.
• The Euribor strip has twist steepened, with whites flat to +2.5 ticks and blues -1.5 to -2.5 ticks from Thursday’s settlement levels. The ERM5/M6 spread once again reached a -38.0 tick low (now -2.0 ticks at -37.0 ticks), a breach of which would expose the June 2024 low at -39.5 ticks.
• Yesterday, ECB’s Kazaks said in a blog that “Recession is not currently the base scenario, but with potentially such large-scale changes in geopolitics and global trade, its probability is high”. However, Muller struck a more cautious tone noting that “Financial markets have an expectation that the ECB will further lower interest rates, but it seems to me that we need to be careful in assessing the inflation outlook”.
• Today’s regional data calendar is headlined by the ECB’s Survey of Professional Forecasters at 0900BST/1000CET. Q4 ’24 EU fiscal is also due at 1000BST.