OPTIONS: Sonia Structure Highlights Rate Upside Friday

Long-end core EGBs outperformed UK counterparts Wednesday, while Greek instruments underperformed peers.

• Global core FI rallied briefly after US CPI came in below-expectations, but the move quickly reversed as the details proved less benign - and Bund and Gilt yields would subsequently hit session highs.
• But they strengthened over the early afternoon as equities pulled back from a nascent rally earlier in the session, with continued concerns over US tariffs/growth weighing.
• Gilts lagged the afternoon rally, leading to underperformance vs Bunds. Both the UK and German curves flattened, with the latter twist flattening.
• Periphery EGBs were mixed, with GGB spreads widening after a surprise Greek dual-tranche syndication announcement.
• In data, the ECB's forward-looking wage tracker saw a small uptick for Q4 2025 negotiated wages (ex one-off payments).
• Thursday's European schedule includes Eurozone industrial production and Italian labour market data, while we hear from several ECB speakers including Rehn, Holzmann, Villeroy and Nagel.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 2.6bps at 2.225%, 5-Yr is up 0.3bps at 2.522%, 10-Yr is down 2bps at 2.877%, and 30-Yr is down 2.1bps at 3.166%.
• UK: The 2-Yr yield is up 5.2bps at 4.225%, 5-Yr is up 4.9bps at 4.338%, 10-Yr is up 4.8bps at 4.722%, and 30-Yr is up 4.3bps at 5.326%.
• Italian BTP spread down 0.1bps at 111.6bps  Greek up 1.5bps at 81.9bps  

Wednesday's Europe rates/bond options flow included:

• OEJ5 116.5/116/115.5p fly, bought for 9.5 in 5k.
• RXK5 130.50/131.50cs, bought for 13 in 5.5k.
• ERJ5 97.6875/97.62/97.5625p fly, bought for 0.75 in 14.5k Total.
• ERK5 97.50/97.4375, bought for 0.25 in 10k.
• ERM5 97.8125/97.875/97.9375/98.00 call condor, paper pays 0.75 on 5k
• ERM5 97.9375/98.0625 cs, bought for 2.25 in 40k.
• ERM5 97.6878/97.75/97.875c fly, bought for -0.5 in 15k.
• ERM5 97.8125/97.9375/98.0625 call fly, paper pays 1.75 for 8k
• ERM5 97.87/98.00/98.12c fly, sold at 2 in 37k total.
• ERM5 97.87/98.00/98.12/98.25c condor, bought for 2.75 in 8k.

• Date $MM Issuer (Priced *, Launch #)
• 03/12 $2.25B #Stellantis $500M 3Y +140, $750M 5Y +170, $1B 10Y +215
• 03/12 $2.2B #Amcor Flexibles NA $725M 3Y +83, $725M 5Y +103, $750M 10Y +125
• 03/12 $1.5B #SoCal Edison $850M 5Y +118, $650M 30Y +160
• 03/12 $Benchmark Canadian Pacific Railway 5Y +75, 10Y +95
• 03/12 $500M #Equitable Holdings WNG 30NC10 6.7%
• 03/12 $Benchmark NetApp Inc 7Y +130, 10Y +140
• 03/12 $1B OMERS Finance 5Y SOFR+69a
• 03/12 $750M PBF Holding 5NC2
• 03/12 $Benchmark AES 7Y +175a
• 03/12 $Benchmark CGI Inc 5Y +100
• Expected Thursday:
  • 03/13 $Benchmark World Bank 5Y SOFR+44a