POWER: Swiss Hydro Stocks Rise Again

ERU5 98.12/98.25/98.37 call fly paper paid 3.5 on 3.5K.

On Friday, Fitch affirmed Germany’s sovereign rating at AAA, Outlook Stable.  Fitch believes that “Germany has the fiscal headroom to accommodate the planned hike in spending, with debt still well below the 80% peak reached in 2010. The country has a long record of fiscal prudence, and we expect a broad commitment to public finance sustainability to remain an important anchor for its 'AAA' rating”.

• “There is strong demand for its debt and financing costs…continue to be favourable compared with other large economies…Nevertheless, the shift in fiscal focus increases longer-term fiscal risks, in particular if the spending increase is not eventually offset by consolidation measures or a lasting improvement in growth prospects”.
• Fitch also caveat that despite fiscal/debt financing strengths, “Germany faces several structural challenges, including a rapidly ageing population, which weigh on its growth prospects and put pressure on public finances”.
• “We forecast the general government deficit will be 3% of GDP in 2025 from 2.8% in 2024, as one-off measures boost revenue and offset our expectation of only a modest ramp up in investment spending”.
• “We forecast the deficit will rise more quickly to an average of 3.9% of GDP in 2026-2027 (a level last reached in the early 2000s, excluding 2020), with defence spending increasing by close to 0.3pp per year. This is consistent with reaching Germany's newly announced 3.5% NATO defence spending target by 2029”.

Latest block trade lodged at 08:10:35 London/03:10:35 NY:

• WNU5 1.5K lots blocked at 115-17, looks like a buyer.
• DV01 ~$270K.