BTP: UniCredit Expect Foreign Flow To Help Backstop Any Spread Widening

• Date $MM Issuer (Priced *, Launch #)
• 05/21 $Benchmark Turkiye 7Y 7.75%a
• 05/21 $Benchmark Kommunalbanken +5Y SOFR+49
• 05/20 $Benchmark ADB 5Y SOFR+42
• 05/21 $Benchmark OKB 3Y +34
• $18.75B Priced Tuesday led by $7B Siemens 7-tranche package

Soft 4.00% Oct-31 Gilt auction: The bid-to-cover ratio of 2.74x was the weakest on record for this line. The average bid-to-cover ratio for the seven auctions (including the launch) going back to February 2024 was 3.09x.

• The lowest accepted price of 97.740 was also below the 97.7625 pre-auction mid-price. The secondary price of the Gilt is now 97.758.
• The auction tail was 0.7bps, above March’s 0.5bps but slightly below December’s 0.8bps.
• It’s possible that this morning’s BBG outages impacted demand at today’s auction.

A phase of dollar sales is helping pressure USD/JPY toward the overnight lows, with the dollar again pressured by weakness in the US long-end. The US curve is again steepening, with 30y yields higher by near 6bps on the day and equities weakening as the 'Sell the US' theme resumes.

• As has been the case in recent weeks, EUR is main beneficiary here - keeping $1.14 as the S/T upside target. EUR/GBP has printed a new high at 0.8459, shrugging off the entirety of the UK CPI tripped weakness to keep focus on 0.8470 the 50-dma.
• After a sluggish start hindered by Bloomberg Terminal connectivity problems, volumes in currency futures are picking up here, with near 7,000 contracts traded in JPY futures on the move. That's near $600mln cash equivalent on the latest USD/JPY sales.