OAT: Rabobank: OATs Benefitting From Capital Rotation, Wary Of Sub-65 Vs. Bunds
Rabobank have underscored their surprise that 10-Year OAT/Bunds trades tighter than pre-Liberation Day levels.
- They note that this move resonates with the recovery in U.S. stocks which they find “similarly difficult to rationalise”.
- They go on to note that they are “pondering whether there may be displacement effect at play as we believe has been in evidence in the Bund market”.
- Specifically, this “relates to the notion of Germany’s safe haven appeal improving as Trump’s policymaking tarnishes that of the U.S”. Rabobank believe that “it is not inconceivable that France might also benefit here as some investors look to diversify into a liquid European market that offers a notable yield pick up to Germany”.
- They go on to note that “as of yet we have no data to back this assertion but do have anecdotal evidence which suggests investors should be wary of chasing any additional narrowing from here. This relates to feedback we have received from our Dutch client base that they had been slow to close their French positions during last Year’s OAT re-rating and were looking for an improved level to exit. One large pension fund specifically noted a 10-Year OAT/Bund spread of 65bp as being a target in this regard”.
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STIR: Cover Dominated In SOFR Futures On Tuesday
SOFR futures were subjected to more pronounced OI movement than their Tsy peers on Tuesday, with net long cover seemingly dominating in the whites, before net short cover came to the fore further out the strip.
| 15-Apr-25 | 14-Apr-25 | Daily OI Change |
| Daily OI Change In Packs |
SFRH5 | 1,120,538 | 1,118,447 | +2,091 | Whites | -61,663 |
SFRM5 | 1,225,842 | 1,242,301 | -16,459 | Reds | -79,240 |
SFRU5 | 972,961 | 997,273 | -24,312 | Greens | -20,827 |
SFRZ5 | 1,065,880 | 1,088,863 | -22,983 | Blues | -8,594 |
SFRH6 | 659,193 | 672,680 | -13,487 |
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SFRM6 | 703,130 | 724,145 | -21,015 |
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SFRU6 | 662,402 | 679,706 | -17,304 |
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SFRZ6 | 878,840 | 906,274 | -27,434 |
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SFRH7 | 596,613 | 605,552 | -8,939 |
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SFRM7 | 553,912 | 563,948 | -10,036 |
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SFRU7 | 364,189 | 365,486 | -1,297 |
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SFRZ7 | 404,394 | 404,949 | -555 |
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SFRH8 | 254,197 | 257,684 | -3,487 |
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SFRM8 | 180,371 | 183,053 | -2,682 |
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SFRU8 | 135,530 | 137,181 | -1,651 |
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SFRZ8 | 148,360 | 149,134 | -774 |
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EGBS: Weak 30-year Bund Auction Weighs On German Futures
Bund futures weakened following a soft 30-year auction, having now unwound ~75% of gains since yesterday's settlement. Futures are +24 ticks at 131.10 at typing, down from a session high of 131.52. Risk sentiment remains soft following overnight concerns around Nvidia’s H20 chip sales in China and fresh Trump tariff rhetoric. A BBG sources piece around US/China trade negotiations has provided some reprieve to equity markets.
- Yesterday’s high at 131.57 provides resistance in Bunds, with the 20-day EMA at 129.84 continuing to provide support.
- German yields are 1-2.5bps lower, with the curve steepening following the auction result. Today's 30-year sale followed a weak Bobl auction yesterday.
- This morning’s soft risk tone generally sees 10-year EGB spreads to Bunds widen. The BTP/Bund spread is up 1.5bps to 119.5bps, but remains comfortably above last week’s close following S&P’s rating upgrade after hours on Friday.
- Spreads have been set at today’s dual tranche 7-year BTP / 30-year BTPei syndication. MNI expects the 7-year size between E7-13bln. Greece also sold E200mln of the 3.875% Mar-29 GGB
- US retail sales data provides the main macro point of interest this afternoon.
US TSY FUTURES: Modest Rounds Of Long Setting & Short Cover Seen Tuesday
OI data points to fairly non-committal trade on Tuesday, with only modest rounds of net long setting and short cover seen across the curve.
- The only positioning swing that topped $1mn in DV01 equivalent terms came via net short cover in WN futures, which proved enough to tilt the curve-wide bias in the same direction.
| 15-Apr-25 | 14-Apr-25 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 3,994,599 | 3,990,143 | +4,456 | +168,512 |
FV | 6,401,596 | 6,391,925 | +9,671 | +419,020 |
TY | 4,754,078 | 4,765,968 | -11,890 | -772,063 |
UXY | 2,221,109 | 2,220,633 | +476 | +42,168 |
US | 1,801,090 | 1,799,997 | +1,093 | +139,500 |
WN | 1,836,868 | 1,842,289 | -5,421 | -1,025,213 |
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| Total | -1,615 | -1,028,076 |
