EU REAL ESTATE: Vonovia: Tender Results

• Fed Funds implied rates range from unchanged on the day to 2.5bp lower out in mid-2026 in a continuation of US-China trade tensions.
• Cumulative cuts from an assumed 4.10% effective: 25bp Oct, 48.5bp Dec, 61.5bp Jan, 75bp Mar, 82.5bp Apr and 97.5bp Jun.
• SOFR futures range from near unchanged to up to +4.5 ticks when looking out to end 2027.
• It sees the implied terminal yield now down to 2.925% (SFRH7, -4bp), implying ~120bp of cuts ahead depending on fixed rate assumptions.
• Looking at daily closes, this terminal yield recently bottomed at 2.84% on Sep 8 vs cycle lows of 2.77% in Sep 2024 ahead of the then start of the FOMC’s easing cycle.
• Powell’s remarks on the economic outlook and monetary policy at 1220ET should headline today’s economic calendar – more to follow on this shortly. 

NOK has weakened against the G10 basket intraday, with both oil prices and rate differentials working against the krone. NOKSEK is down 0.6%, while EURNOK is up almost 1% at typing.

• NOKSEK is currently at ~0.9360. Initial support is the Sep 5 low at 0.9324. From a medium-term perspective, the cross continues to consolidate below the 0.9500 resistance zone, suggesting risks remain skewed to the downside.
• EURNOK has pierced last Friday’s 11.7693 high, exposing the Sep 5 high of 11.7935.
• Our commodities team note that intraday weakness in Brent crude futures (down over 2%) mainly reflects the negative global demand ramifications of increased US-China trade tensions. An upward revision to the IEA’s 2026 oversupply expectations in its latest monthly report has also added pressure to the space.
• 2-year NOK swap rates are down 3bps today, more so than SEK and EUR peers. While yesterday’s Norges Bank certificate news mostly concerned front-end money markets, some analysts noted that associated widening in FRA/OIS spreads would have a dovish impact on Norges Bank’s hypothetical rate path.
• Domestically, focus turns to tomorrow’s Norwegian budget announcement. We will send more on that topic later today. In Sweden, final September inflation tomorrow morning is unlikely to be a market mover. 

OI data points to net long setting dominating through the reds as SOFR futures ticked higher on Monday (only broken by net short cover in SFRZ5), reacting to the increase in Sino-U.S. trade tension.

• A more balanced mix of net long setting and short cover was then seen further out the strip.