HYBRIDS: Prysmian (PRYIM Perps: BB neg) New Issue FV
May-14 08:22
IPT: EU Bmk PerpNC5.25 5.875%-6%
• Sub_sen I will take 167bps. BB names have a wide range. TELEFO 137; VOD 135; but then Bayer 205; ORSTED 196. Prysmiam trades outside ORSTED in seniors but the ORSTED perps trade poorly with a low step. Prysmian’s business is in a good spot currently with cable demand likely to remain very high.
• FV: 5.375% with Sub_Sen +167; Senior +136; Swap 2.34%.
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BTP: Outperform Following Surprising S&P Upgrade On Friday
Apr-14 08:17
- BTPs outperform after S&P’s upgraded Italy's sovereign rating to BBB+ (Outlook Stable) after hours on Friday. The decision was generally not expected, with Italy heading into the review with a Stable Outlook. That sees the 10-year BTP/Bund spread tighten 4.5bps to 119.5bps this morning, unwinding the majority of last week’s widening.
- BTP futures are +48 ticks at 118.58, just off earlier session highs of 118.63. Initial firm resistance to monitor is 119.07, the Apr 8 high. Clearance of this level would be a bullish reversal development. The April 10 low at 117.28 provides support.
- S&P wrote that “the upgrade reflects Italy's improved economic, external, and monetary buffers amid rising global headwinds, and the gradual progress it has made in stabilizing public finances since the pandemic's onset”.
- Although US tariffs will impact Italy’s open manufacturing-based economy, S&P noted that “significant increases in government spending on defense and public infrastructure” in Germany will partially offset the blow from US protectionism.
- The upgrade sees Italy’s rating with S&P move two notches above Moody’s Baa3 (Outlook Stable) and one notch above Fitch’s BBB (Outlook Positive). Moody’s are scheduled to review Italy on May 23.
GBP: Prolonged Tariff Reprieve and Stocks Strength Could See GBP Toward 1.34
Apr-14 08:09
- Following Liberation Day, GBP was a standout underperformer, as the UK economy signaled unique exposure to Trump's tariffs given the government's leniency toward countermeasures. The opposite is now true: with reciprocal tariffs delayed, GBP is now rallying well - underscoring GBP's correlation with risk - which looks through only marginal tweaks to monetary policy pricing.
- GBP strength today is accompanied by a further rally in the FTSE-100 (now ~7.5% off lows, but still ~9% off highs), despite the often observed inverse correlation between the two - which serves as a further signal that tariff reprieve and risk-on is the primary driver of this move, rather than a reorientation of BoE pricing for 2025.
- This makes EUR/GBP a key cross ahead. EUR's status as a quasi-safe haven through US-triggered volatility has seen the price hit near 18-month highs and the most technically overbought since 2022. As such, the cross could be subject to a sharper reversal should market jitters around tariffs further recede.
- Technically, moving average studies remain in a bull mode position that highlights a dominant uptrend. An extension higher would open key resistance and the bull trigger is 1.3207, the Apr 3 high.
GILTS: Consolidating Friday’s Late Rally
Apr-14 07:45
- Gilt futures are +40 ticks at 91.04, down from an opening high of 91.24 but nonetheless consolidating the rally into Friday’s close. Zooming out though, the contract remains almost 350 ticks below the April 7 high of 94.50.
- Initial support in Gilts is Friday’s low at 90.47, clearance of which would expose the April 9 low at 89.99. Initial resistance is at 91.84, the 20-day EMA.
- Yields are 1.5-6bps lower on the session, with 30s (last week’s notably underperformer) leading.
- Increased correlation to risk assets appears to have reduced the hedging appeal of gilts, while the UK's fiscal fragility and instances of limited liquidity further out the curve point to continued headwinds for UK paper in the near-term.
- SONIA futures are -0.5 to +4.0 ticks through the blues, twist flattening.
- A 25bp BOE cut remains essentially fully priced through May, with 76bps of easing priced through year-end.
- Over the weekend BOE’s Greene provided the familiar view that US tariffs “will impact the economy” but have an “ambiguous” impact on inflation. This broadly echoes remarks from Lombardelli and Breeden last week.
- Meanwhile, Chancellor Reeves said the UK had suspended import tariffs on 89 products, and increased financing support available to exporters via UKEF to GBP80bln from GBP60bln prior.
- Labour market (Tues) and inflation (Weds) data are due this week. MNI’s preview will be out later today.
| Meeting Date | SONIA BoE-Dated OIS (%) | Difference Vs. Current Effective SONIA Rate (bp) |
| May-25 | 4.225 | -23.3 |
| Jun-25 | 4.135 | -32.3 |
| Aug-25 | 3.952 | -50.6 |
| Sep-25 | 3.866 | -59.2 |
| Nov-25 | 3.736 | -72.1 |
| Dec-25 | 3.701 | -75.7 |
| Feb-26 | 3.647 | -81.1 |
| Apr-26 | 3.641 | -81.7 |
| Source: MNI/Bloomberg |
