THAILAND: Shinawatras Under Fire, Court Set To Rule In Thaksin's Case On Aug 22

The weakness in core global FI markets stalls a little in recent trade, seemingly driven by cross-market inputs, with crude oil futures ticking to fresh session lows and Friday’s high in Euro Stoxx 50 futures holding.

• Core global FI curves still bear steepen on the day.
• No readthrough from comments from ECB’s Nagel & de Guindos.
• ECB pricing remains biased towards 1 further 25bp cut in the current cycle, while BoE pricing shows ~45bp of easing through year-end.

"The Kingdom of Sweden, rated Aaa/AAA/AAA (all Stable) by Moody's/S&P/Fitch, has mandated Danske Bank, Goldman Sachs Bank Europe SE, J.P. Morgan and SEB to lead manage its forthcoming 3-year (due 26 June 2028), fixed rate, EUR-denominated, RegS, syndicated benchmark transaction. The transaction will be launched in the near future, subject to market conditions."

From Market source

The 10-year OLO/Bund spread has seen a fairly contained impact from Fitch’s rating downgrade on Friday, currently 0.5bps wider at 57bps. While still slightly underperforming EGB peers on the session, a downgrade did not come as a large surprise given Fitch had held Belgium on a negative outlook since March 2023. A simple yield/ratings curve illustrates that OLO pricing already incorporates a degree of ratings risk premium. The next Moody’s and S&P ratings decisions are not due till October, with both agencies also holding Belgium on a Negative Outlook at present.

• Fitch noted that “Belgium's fiscal position has structurally weakened over the last few years and we expect a continued moderate upward trend for general government debt/GDP.” Meanwhile, medium-term risks come from “rising ageing expenses, higher defence spending and, to a lesser extent, higher EU transfers and rising interest expenses”.
• Although the Federal government has outlined a fiscal savings package through 2029, Fitch note that “Belgium's recent record of delivering consolidation measures has been relatively weak”. Specifically, “almost one-third of savings is expected to come from the second-round effects of structural reforms, but Belgium's Court of Audit has identified a very high risk that the government is significantly overestimating these effects.”
• Elsewhere, S&P affirmed Germany’s rating at AAA (Outlook Stable), highlighting that “Germany's new fiscal package could push budget deficits to over 3.5% of GDP by 2027, significantly above our previous forecast (1.3% of GDP), but the additional investment spending could raise Germany out of its current economic malaise, with our expectation of real economic growth of 1.5% in 2026-2028.”
• The 10-year BTP/Bund spread has unwound 1bp of Friday’s 2bp widening, with equity sentiment supported this morning despite continued tensions in the Middle East.