OUTLOOK: Price Signal Summary - Corrective Bull Cycle In Bunds Extends

• Italian bonds have outperformed Eurozone peers through 2025, with persistent tightening to Bunds observed since early April (and on a longer-term basis, since 2022).
• The 10-year BTP/Bund spread has tightened almost 40bps year-to-date, and is currently hovering around 81bps – slightly tighter than the OAT/Bund spread.  There have been several touted drivers for the outperformance versus Bunds and other EGB peers over the past 5 months: Relative political stability in Italy compared to peers such as France, ongoing domestic fiscal consolidation and associated positive ratings action, a pullback in EUR rates vol and finally expectations for higher German fiscal spending.
• From a technical standpoint, the trend remains in favour of further tightening. However, the spread has struggled to meaningfully push below the 2010 lows of around 76bps in recent weeks.

The 'inter-union', formed of France's major employee unions/confederations, is set to engage in another day of strikes and protests against the gov't of PM Sebastien Lecornu. The French Democratic Confederation of Labour (CFDT), one of the five major trade union confederations, announced the planned industrial action to take place on 2 October. This follows meetings earlier today between union officials and Lecornu at Matignon. 

• Ahead of today's meeting, Liberation outlined the inter-union's demands from Lecornu: "Abandonment of the increase in the retirement age to 64 , the doubling of medical deductibles, the freezing of benefits, a new reform of unemployment insurance, but also "social and environmental conditionality of public aid to private companies" ... The list of union demands is long and the suspension - at a minimum - of the 2023 pension reform occupies a central place."
• Lecornu meets with employers' organisations this afternoon, as "The head of the Medef (French employers' association), Patrick Martin, denounced the "dangerous theories for our businesses" that fuel the debate, such as the Zucman tax."
• The 18 September strikes resulted in significant disruption for industry, schools and public transport, with some outbreaks of violence reported.
• The gov't remains in an extremely vulnerable position, unable to pass an austerity budget that former PM Francois Bayrou argued was crucial for restoring the public finances, and short of a majority in the National Assembly. A gov't spox said earlier President Emmanuel Macron did not discuss the option of dissolving parliament during an earlier meeting with the Council of Ministers. 

An EU trade source addresses U.S. President Donald Trump's recent calls for tariffs on China.- On MNI Policy MainWire now, for more details please contact sales@marketnews.com