OIL: Nigeria Crude Output Falls Back Below OPEC+ Quota: NUPRC

J.P.Morgan write “as a short-term bearish hedge, we find paying the body of the Mar25/Apr25/Jun25 ECB-dated OIS fly attractive. “

• They reason that “while not our baseline view, there is some risk of the ECB slowing down the pace of easing by skipping the April meeting as they continue to ease towards neutral, especially if incoming data (domestic and global) surprises to the upside.”
• They caution that “the main risk to this scenario would come from the ECB delivering a cut in April while skipping the June meeting.” But ultimately, they “ascribe a very low probability to such an outcome as the ECB is likely to skip a meeting where they do not have updated staff forecast (April) as opposed to a meeting with fresh forecasts (June) at this stage of the easing cycle.”

Couple of Bank Options:

• SX7E (20th Jun) 160/140ps, bought for 4.40 in 6k.
• SX7E (20th Jun) 177.5c, bought for 2.45 in 5k.

Light outperformance in 10-year peripheral bonds against Bunds, with European equity futures off Friday’s lows. The rally in European NatGas prices is likely helping to contain upside across core/semi-core EGBs this morning. 

• The BTP/Bund spread is ~1bp tighter at ~108.5bps, after 106bps once again provided a floor to the spread last week. We look for a 2040 BTP to be launched via syndication in February, although with a decent risk of the transaction slipping into March.
• The OAT/Bund spread is a little tighter at ~71.5bps. However, medium-term political risks remain prevalent despite PM Bayrou surviving last week’s censure motions, after he forced the 2025 budget through the National Assembly using Article 49.3.
• Our Political Risk team highlighted last Friday that there is significant uncertainty surrounding the so-called 'spontaneous censure motion' that the PS intends to bring against the gov't this week. With the PS and presumably the rest of the leftist New Popular Front (NFP) alliance parties in favour, if the far-right RN backs the motion it would be enough to oust Bayrou.