PLN: No Reaction in PLN to NBP Decision, Focus on Presser Tomorrow

Tightening momentum in the 10-year BTP/Bund spread has persisted since October 23rd. The continued pullback in EUR rates volatility, alongside the relative attractiveness of BTPs versus OATs (from a political/fiscal standpoint) appear to be outweighing weak Italian growth fundamentals. The spread is at its lowest since early 2010, with downside attention now on the 70bps figure.  

• EUR 3m10y swaption vol is another 0.5bps lower today at 50.8bps, the lowest since 2021. Last week’s heavy regional calendar is now in the rear-view, and did not bring any major surprises.
• Although OATs also outperform Bunds intraday, the 10-year OAT/Bund spread remains stuck in a 75-80bps range, with lingering political risks limiting narrowing episodes.
• The 10-year BTP/OAT spread has moved deeper into negative territory, now at -4.5bps. Meanwhile, the 30-year BTP/OAT spread turned negative for the first time on record last Friday.
• The next round of Italian supply is due next week, while France will sell LT OATs on Thursday. Note however there are E4.1bln of Italian coupon payments due this week. 

• Treasuries continue to recover from this morning's deal-tied selling, trading mildly higher in 2s-10s after lower than expected ISM Mfg & Prices Paid data.
• Currently, the Dec'25 10Y trades +2.5 at 112-24 vs. 112-27 high, 10Y yield -.0155 art 4.0930%.
• The 10Y contract needs to trade above 113-18+, the Oct 28 high to signal a possible bullish reversal. Key resistance and the bull trigger is at 114-02, the Oct 17 high.

• MNI: US ISM OCT MANUF PURCHASING MANAGERS INDEX 48.7
• US ISM OCT MANUF PRICES PAID INDEX 58.0