EU CREDIT UPDATE: Raiffeisen: Books (€500mn WNG 6NC5 SNP)

The Eurozone debt to GDP ratio inched up to 88.0% in Q1, up from 87.4% in Q4 2024 and 87.8% in Q1 2024. Compared with a year ago, the debt/GDP ratio has fallen most in Greece (-9.3pp to 152.5%), Cyprus and Ireland (-6.1pp to 34.9% - though, a reminder that Irish national accounts are best viewed through the lens of modified GDP, which strips out globalisation effects). The largest increases in debt/GDP were seen in Finland (+5.1pp to 83.7%), Austria (+4.1pp to 84.9%) and France (+3.6pp to 114.1%).

• The seasonally adjusted deficit to GDP ratio was 2.9% in Q1, down from 3.2% in Q4 2024 but up from 2.8% in Q3.
• A ramp-up in German (especially defence) spending is the key European fiscal theme in the coming years. Analysts were on balance surprised to the upside by the 2025-2029 fiscal plan announcement in terms of money spent, but some continue to point to some downside risks to the announced investment figures, and see the need for structural reforms in Germany.
• The seasonally adjusted German deficit inched down to 2.3% GDP in Q1 (vs 2.4% prior), but will likely start rising from the second half of this year onwards as the spending uptick kicks in.
• Although some high debt countries (e.g. France and Italy) are attempting to consolidate primary balances to reduce debt burdens, increased interest expenses (due to Covid-induced spending and higher interest rates) continue to push total debt/GDP in the opposite direction.

"*TAIWAN SAYS TO CONDUCT NEW ROUND OF TRADE TALKS W/ US THIS WEEK" Bloomberg

An uptick in volumes responsible for this bid in GBP; GBP futures see near 1,200 contracts trade inside the past three minutes (cash equivalent of over $90mln) for the best volumes of the day so far.

• This tips GBP/USD within range of the Friday high of 1.3475 - the next notable upside level. GBP now among the best performers in G10, but GBP/JPY still trades lower.
• Rate appears to be building a base at the mid-July pullback lows of 1.3365 after last week's data which - while not ruling out an August BoE rate cut - has dented the pricing for sequential cuts later this year.
• Prelim PMI data due Thursday is the calendar highlight, but broader focus remains on the state of public finances as the Chancellor's revenue raising options continue to dwindle: The Times write this morning that Reeves is to defy calls from some party members to institute a wealth tax - deeming the option as unworkable.