HYBRIDS: Repsol: 2026 Perps Called (REPSM; Hyb Baa3/BBB-/BBB-)

House Republicans yesterday released a 91-page Continuing Resolution to extend government funding through November 21, preventing a government shutdown on October 1. The CR is ‘clean’ - maintaining funding at FY25 levels and eschewing policy changes - but includes new security funding for lawmakers and federal officials. The CR does not include any of the healthcare measures demanded by Democrats.  

• House Speaker Mike Johnson (R-LA) has teed up a House vote on Friday, after which the bill will be passed to the Senate. Although Johnson only has a one-vote cushion, the prevailing view is he can likely muscle the bill through the House along party lines. The outlook in the Senate is less certain, with Senate Republicans gambling at least seven Democrats will vote to keep the government open.
• Senate Minority Leader Chuck Schumer (D-NY) and House Minority Leader Hakeem Jeffries (D-NY) issued a joint statement, “...Republicans are once again taking orders from Donald Trump... recklessly marching our nation to the brink of a shutdown.”
• Jeffries told reporters, “House Democrats have been clear that we will not support a partisan Republican spending bill that [guts healthcare].”
• Axios reports that Schumer is "preparing to go public with a counterproposal that jams Republicans" and keeps the government open. However, his leverage may be ‘toast’ as a half-dozen Senate Democrats are “quietly open” to backing the CR.

Figure 1: Government Shutdown by October 1

Source: Polymarket

The lack of upside surprise in this morning’s UK CPI data (which was in line to a touch softer than wider expectations) and an FT story suggesting that “China tells its tech companies to stop buying all of Nvidia’s AI chips” generated a modest rally in gilts this morning.

• Futures traded as high as 91.70 before fading to 91.65.
• Initial resistance at the September 11 high (91.82) remains untouched, although the bullish technical theme is intact. Initial support located at the September 2 low (90.65).
• Yields 1-2bp lower, recent flattening bias on the curve remains intact with 2s10s & 5s30s ~15bp off their respective September closing highs.
• 10-Year spread to Bunds ~0.5bp tighter at 194bp.
• The outcome of tomorrow’s MPC meeting can be boiled down to two discrete topics: the vote surrounding the pace of APF reduction and any updates on communications and the vote surrounding Bank Rate. The biggest uncertainty and market reaction is expected around the former, with much less focus being placed upon the latter - but neither aspect should be ignored.
• Our full preview of that event is here.
• GBP STIRs show ~8bp of BoE cuts priced through year-end, little changed on the day.
• Local headlines have pointed to a markdown in the OBR’s productivity forecasts and a negative outcome when it comes to steel tariffs imposed by the U.S.

FFV5 paper paid 95.945 on ~10.6K