CZECHIA: Pavel Warns Allegations Against Turek Could Sink His Ministerial Bid

Looking ahead at Triple Witching Friday, Option expiries in Notional terms:

US:

• SPX: $2.73T.
• NDX: $107.39bn.
• Amazon: $17.57bn.
• Apple: $20.65bn.

EU:

• SX5E: €198.35bn.
• SX7E: €18.69bn.
• DAX: €40.20bn.
• FTSE: £21.25bn.
• Lloyds: £5.38bn.

EQUITY ROLL PACE: Some might favour rolling earlier, ahead of the FOMC.

US:

• ESA: 26%.
• NQA: 13% (below pace).
• DOW: 20% (below pace).
   

EU:

• VGA: 10% (below pace).
• Banks: 7% (below pace).
• Stoxx600: 9% (below pace).
• Dax: 10% (below pace).
• FTSE: 13% (below pace).

Friday’s rating actions help drive moves in EGB spreads early today, with Spanish (S&P upgraded Spain to A+; Outlook Stable) & Portuguese (Fitch upgraded Portugal to A; Outlook Stable) 10s flat vs. Bunds, while French paper is ~1.5bp wider (Fitch downgraded France to A+; Outlook Stable).

• Friday’s moves underscored the idea of rating convergence between France & the Iberians, given the political and fiscal risk evident in the former.
• The 10-Year Spain/France/Portugal fly is on track for a fresh cycle closing low, trading through -23bp.
• We highlighted the likelihood of the moves for both France and Portugal last week.
• Commerzbank suggests that the fallout for OATS is “likely to be limited, given that OATs are already trading markedly cheaper than double-A or single-A rated peers. While some investors may start to reduce single-A OAT exposure, others may use average ratings, adjust the rating thresholds in their EGB benchmarks, or utilise more attractive spread levels. We close our tactical OAT-Bund spread tightening view and turn neutral for the time being”.

Fig. 1: 10-Year Spain/France/Portugal Butterfly (bp)