EU REAL ESTATE: New Immo: 5yr

The 10-Year SPGB/OAT/PGB butterfly has stabilised around -76bp after Monday’s political developments in France triggered the latest round of OAT weakness vs. both Iberian & broader EGB peers.

• Today’s stabilisation comes as the OAT/Bund spread fails to break above year-to-date closing highs (86.3bp) on a sustained basis, with several desks suggesting that a definitive break beyond that level will likely require further French political deterioration
• Zooming out, the 10-Year SPGB/OAT/PGB fly trades at the lowest level seen within the BBG data series (going back to ’97), reflecting not only the French political, fiscal and related sovereign credit rating risks, but also the positive fiscal and sovereign rating trajectories evident in the Iberian nations.
• A reminder that the structure was trading around +50bp at the end of ’23, and finished ’24 around -50bp, as French political and fiscal risks deepened

Fig. 1: 10-Year SPGB/OAT/PGB Butterfly (bp)

Source: MNI - Market News/Bloomberg Finance L.P.

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Full Article: US DAILY BRIEF

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