BUNDS: /SWAPS: Long End ASW Outperforms For Second Day
Feb-14 09:12
A second day of outperformance for long end German ASWs.
- Several factors help explain the move seen over the last 24 hours, in our view:
- Spill over from U.S. spread widening (although regulatory change, the driver of the U.S. move, doesn’t seem to be forthcoming in the EU).
- Market positioning for a delay of German 30-Year issuance after tariff-related uncertainty seemed to de-rail the syndication from being launched last week. Note that the presence of the impending German election is leading to some suggesting that the syndication may not come until after the quarterly futures roll is complete (first notice is March 6).
- Concentrated short positioning in German long end swap spreads.
- Looking ahead, fundamentals still seem to signal further downward pressure for long end ASWs, although we did previously warn that already heavy short positioning would likely exacerbate any widening episodes, if a catalyst became apparent.
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EUROPEAN INFLATION: Broad-based Acceleration Of Spanish Inflation In December
Jan-15 09:07
Spanish December inflation confirmed flash estimates at 2.8% Y/Y, up from 2.4% in November. All major sub-components other than processed foods accelerated on an annual basis, with core (ex-energy/unprocessed food) inflation ticking up to 2.6% Y/Y (vs 2.5% prior).
- Services inflation was 3.7% Y/Y (vs 3.5% prior). A 12.4% Y/Y rise in package holidays (vs 8.1% prior) was an important factor here, with the recreation and culture component at 3.9% Y/Y (vs 2.5% prior). More broadly, the December services PMI highlighted that services firms have been able to pass on input cost rises to consumers.
- Non-energy industrial goods inflation remained soft at 0.3% Y/Y (vs 0.2% prior). In contrast to services firms, the December manufacturing PMI highlighted that competitive pressures have limited pricing power amongst Spanish manufacturers.
- Processed food inflation was 2.4% Y/Y (vs 2.5% prior), while unprocessed food inflation accelerated to 2.1% Y/Y (vs 0.8% prior).
- Energy inflation was 5.5% Y/Y (vs 2.6% prior), driven by fuel prices.
GERMAN AUCTION PREVIEW: On offer next week
Jan-15 09:03
DFA has announced it will be looking to sell the following Green Bunds at its auction next Tuesday, January 21:
- E1bln of the 2.10% Apr-29 Green Bobl (ISIN: DE000BU35025)
- E1bln of the 2.30% Feb-33 Green Bund (ISIN: DE000BU3Z005)
EGB OPTIONS: Bund call spread
Jan-15 09:03
RXH5 131.50/132.50cs, bought for 17.5 in 3k.
