OAT: Spread Vs. Bunds & French CDS Remain Below Highs Seen in '24 & '25

The ECB’s forward looking wage tracker points to a continued decline in negotiation wage growth in Q1 2026. Overall, the results are consistent with a further softening in services inflation pressures in the coming years, in line with ECB signalling. 

• Wage growth excluding one-off payments is seen at 2.61% Y/Y, down from an estimated 3.11% in Q4 2025. Note that the June iteration only captured negotiations up to Q4 2025. Revisions between the June and July iterations were minimal for 2025, but on net downward for 2024.
• Meanwhile, the Q1 2026 figures will likely be revised in the coming months as employee coverage increases. Current coverage is just 32.5% (vs 45.3% coverage in Q4 2025).
• Still, 2.61% negotiated wage growth is below the ECB’s 2.8% projection for Q1 2026 compensation per employee growth.

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Crude prices remain underpinned after registering strong gains so far this week, despite the bounce in the USD.

• Our commodities team note that oil prices pushed above the recent range after U.S. President Trump outlined the new early August deadline for a Russia/Ukraine ceasefire.
• Looking forwards, focus is on the risk of supply disruption from further sanctions on Russian oil, but President Trump doesn’t appear concerned about supply matters, suggesting the U.S. will increase its oil output to counter any related disruptions.
• Elsewhere, OPEC is expected to increase its production target for September at its August 3 meeting. Many analysts expected the rise to lead to a market oversupply later this year and into 2026.