BUND TECHS: (Z5) Bear Cycle Intact

• MNI: UK SEP PSNCR GBP-10.86 BN
• UK SEP CGNCR GBP15.77 BN
• UK SEP PSNB-X GBP+20.25 BN
• UK SEP PSNB GBP+20.25 BN

• Today’s September public finance data release will be the last to be incorporated into the OBR’s forecast update.
• The Bloomberg consensus sees public sector net borrowing at GBP20.8bln in September. Assuming no revisions to back data this would equate to GBP104.6bln in the fiscal year-to-date which is 12.0bln above the OBR’s forecast and 18.7bln higher than Apr-Sep 2024.
• Across the sell-side previews we’ve read, analysts are watching closely for revisions to historical data, reflecting recent changes to VAT receipts and also because September is more open to seeing revisions to prior data, due to local authority spending outturns becoming available.
• Analysts see net interest costs (linked to RPI) lower than the OBR’s forecast (GBP9.5bln for September) given the smaller-than-forecast M/M rise in RPI. PAYE income tax receipts may continue tracking lower due to the fall in payrolled employees in September.
• The last release (August data) saw a big upward revision to fiscal YTD borrowing, overshooting the OBR's forecast by GBP11.4bln YTD and eliciting a notable market reaction (alongside the stories that broke the same day that the OBR would be looking to downgrade its productivity forecasts).
• Since then, the ONS has corrected data submitted by HMRC on VAT receipts that will reduce the tracking error to a still significant GBP9.4bln, standing at a corrected GBP81.8bln YTD.
• Aside from the VAT error, weak “Other taxes and receipts” led PSNB to fall far short of the OBR’s forecast in August (other taxes stand at GBP118.7bln YTD, 4.1bln below forecast).
• Note that no more data will be incorporated into the OBR's EFO forecast used for the Budget after Halloween's cutoff; only new fiscal measures will adjust the forecasts after this date. October’s data will be released on 21 November, five days before the Budget.

Estonia is likely to hold a syndicated transaction today; Finland and Germany look to hold auctions today, with Germany returning tomorrow. Italy has opened books for its retail-only BTP Valore and we pencil in a Slovakian syndication. Slovakia and the EU have both held auctions yesterday. We pencil in issuance of E14.9bln for the week (excluding retail), down from E38.8bln last week.

For the full MNI EGB Supply Daily with a recap of issuance this week and a look ahead to this week and next week's issuance, click here.

• Estonia has sent a mandate for a E500m (WNG) tap of the 3.250% Jan-34 ESTONI (ISIN: XS2740429076). The transaction is expected in the near future, we expect today . This follows our policy team's interview with their Treasury earlier yesterday.
• Finland will come to the market today to hold a conventional auction for up to E1.5bln with on-the-run 7/10-year RFGBs on offer: the 2.625% Apr-32 RFGB (ISIN: FI4000591862) and the 3.00% Sep-35 RFGB (ISIN: FI4000587415). Note that both RFGBs have been launched this year with the 7-year launched via syndication in August and seeing demand so strong that it was reopened in the ORI the following week.
• Germany will also hold an auction today to hold its final green auction of the year with a combined E1.5bln auction size. That will put total 2025 green funding at E14.5bln (versus a target of E13-15bln). The DFA will re-open two lines: the 1.30% Oct-27 Green Bobl (ISIN: DE0001030740) for E750mln, alongside the 1.30% Oct-27 Green Bobl (ISIN: DE0001030740) for another E750mln.
• Germany will return to the market tomorrow with E3bln of the 7-year 2.50% Nov-32 Bund (ISIN: DE000BU27014) on offer.
• Italy will look to issue a new 7-year Oct-32 BTP Valore (ISIN: IT0005672016) this week. Day 1 books totalled E5.4bln,almost 50% higher than the last BTP Valore (E3.70bln in May 2024 with eventual takeup of E11.2bln) but less than the E6.44bln day 1 total for the Valore in February/March 2024 (eventual takeup E18.3bln).