BUNDS: Testing the Initial resistance

Spreads to Bunds remain fairly insulated from widening during today’s risk-off price action, with the major 10-Year differentials last little changed to 1bp wider on the day.

• Pricing of deeper ECB easing is offsetting some of the GDP growth-related widening impetus.
• Meanwhile, the medium-term increase in German issuance continues to factor into a lot of the spread-related commentary we have read, although some now hold a bias for modest spread widening.
• OAT/Bunds ~71bp after closing above 70bp on Friday.
• A reminder that RN leader, Marine Le Pen, will appear in front of a judge as part of an RN embezzlement trial. A decision is expected between 10:00-12:00 CET (09:00-11:00 BST). Le Pen could be suspended from elections for 5 years if found guilty.
• Whatever the outcome, the French political situation is set to continue to present a source of uncertainty, with Le Pen polling well and fiscal risk remaining evident.
• BTP/Bunds is set for its highest closing level since mid-March but remains below 115bp.

Gilts through last week’s highs on the wider risk-off price action stemming from U.S. tariff worry ahead of “Liberation Day”.

• Futures peak at 92.10 before fading back below 92.00, still up the best part of 50 ticks on the day.
• Note that the short-term technical trend in the contract remains bearish, but the bullish threat has increased.
• Initial Fibonacci resistance (92.17) protects trendline resistance drawn off the March 4 high (91.55).
• Yields 2.5-4.0bp lower, 10s outperform on the curve.
• GBP STIRs still around levels we flagged ahead of the gilt open, as most of the early dovish adjustment holds.
• The DMO will hold its consultations regarding FQ1 (April to June) issuance at 15:30BST (investors) and 17:00BST (GEMMs) today.
• We set out our expectations for gilt issuance across FY25/26 in our UK Issuance Deep Dive publication.
• Elsewhere, only lower tier UK economic data is due on Monday, which will leave macro cues at the fore for much of the session.

• EUR Benchmark of the new 5y May-30 MS+32 Area
• Coupon: Annual, act/act, long first
• ISIN: EU000A2SCAT6
• Maturity: May 7, 2030
• Format: Reg S, bearer, 0% rw
• Issuer: European Financial Stability Facility (EFSF)
• Bookrunners: Citi, CA-CIB (B&D), SocGen
• Settlement: April 7, 2025
• Timing: May price today.

Details via Bloomberg