OAT: Natixis Flag Spread Widening Risk
As previously noted, OAT/Bunds has moved back towards 85bp in light of French Socialist leader Faure’s pessimistic comments surrounding the potential for an agreement on the Budget as things stand (more detail in recent bullets).
- In the case that parliamentary elections are called, Natixis believe that “spread volatility will persist (80-90 bp) due to uncertainty over the outcome of the elections. If the Parliament remains divided - which is our central scenario, the prospect for fiscal consolidation will continue to be uncertain in the medium term, justifying the high premium on French sovereign bonds. As long as there is no majority in the National Assembly, OAT investors will be not able to see progress on France’s debt and fiscal problems. Another negative factor affecting the spread would be the acceleration of France's sovereign rating downgrade by rating agencies (24/10: Moody's and 28/11: S&P) by the end of the year, which could add an additional 5bp to the spread (95bp)”.
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OUTLOOK: Price Signal Summary - EURUSD Resistance Remains Exposed
- In FX, the trend theme in EURUSD remains bullish. Friday’s gains resulted in a print above resistance at 1.1743, the Aug 22 high. A clear break of this hurdle would mark a short-term bullish development and signal scope for an extension towards 1.1829, the Jul 01 high and bull trigger. Support to watch is around the 50-day EMA, at 1.1619. A clear breach of this average would signal scope for a deeper retracement.
- GBPUSD is holding on to the bulk of its latest gains following the recovery from last Wednesday’s low. The move higher appears corrective - for now. Recent weakness resulted in a breach of 1.3391, the Aug 22 low. This signals scope for a deeper retracement and exposes 1.3315 next, 61.8% of the Aug 1 - 14 bull leg. On the upside, clearance of 1.3595, the Aug 14 high, is required to reinstate a bull theme.
- Resistance to watch in USDJPY is 148.78, the Aug 22 high. Last week’s gains resulted in a print above it. A clear break of this level would highlight a range breakout and a stronger bullish theme, and open 149.81, 76.4% of Aug 1 - 14 bear leg. However, the pair has pulled back from its recent highs and remains inside its range. Key support to watch is 146.21, the Aug 14 low and the bear trigger.
EU-BOND SYNDICATION: New 5/30-year mandate
"The EU has mandated Barclays, BofA Securities, Crédit Agricole CIB, LBBW and Morgan Stanley as Joint Lead Managers for its upcoming EUR Fixed Rate RegS Bearer dual tranche transaction, comprising a new 5-year benchmark line due 14th October 2030 and a new 30-year benchmark line due 12th of October 2055. No further group. The transaction will be launched tomorrow, subject to market conditions."
- MNI pencils in E4-7bln for each of the lines and we look for a total combined size of E9-14bln (skewed towards E11-12bln).
MNI: INV RPT:Livestream MNI Connect With ECB Luis de Guindos: Sep 18
You are invited to listen to a Livestreamed MNI Connect Video Conference with Luis de Guindos, the Vice-President of the European Central Bank.
Details below:
- Speaker: Luis de Guindos, Vice-President of the European Central Bank
- Topic of discussion: 'Euro Area Growth and Inflation Outlook.'
- Date: Thursday 18 September, 9am-10:30am London time
- This event is on the record and will run as a Zoom Webinar
To register please go to: MNI Webcast Registration
