HYBRIDS: OMV: Redemption

Looking at today's auction with the 3.00% Sep-35 / 0.25% Sep-40 RFGBs on offer by Finland, Nordea "prefer to increase exposure in the 10-year segment, particularly considering the enhanced liquidity characteristics at this point on the curve" given the "relative stability of the 15-year sector on the Finnish curve".

• They highlight the recent Fitch Finland downgrade to AA (outlook: stable) on July 25th had "no substantial repricing of the Finnish curve" as an effect as the downgrade was "largely anticipated" by markets.
• They did note some spread widening between Finland and Austria in the 10-year segment, which they attribute to "the strong performance of Austrian bonds following their RAGB 02/35 tap", however.
• They do also "find value in establishing long positions in Finland against short positions in OATs ahead of this upcoming auction, as autumn will likely introduce uncertainty regarding the French political landscape, while global geopolitical risks persist with downside risks predominating across multiple dimensions."

With today’s regional calendar light, EUR STIRs will look to headline flow and the US CPI report for intraday cues. The OIS-implied probability of another 25bp cut this cycle continues to gradually fall, with the March 2026 contract now pricing 16bps of cuts (vs 23bps at the start of last week).

• ECB officials have suggested that a fresh deterioration in data is required to deliver another cut in September, meaning focus remains on next week’s flash PMIs and the August flash inflation round at the end of the month.
• Euribor futures are flat to +1.0 ticks through the blues, perhaps seeing some spillover from this morning’s UK labour market report (see earlier posts for more). 
• ERH6 continues to hover just above support at 98.095 (August 1 low), currently +0.5 at 98.115.
• The August German ZEW survey is due at 1000BST, but markets don’t tend to put too much stock in this release.

RXV5 127/125ps, bought for 27.5 in 1k.