UKRAINE: Zelensky Vows Support For Graft Probe As 'Operation Midas' Shakes Gov't

• Size: E1bln WNG (We had pencilled in a E1.0-1.5bln range for this week's ESM transaction, but leant towards a E1.25bln size rather than the E1bln WNG announced. Following today's sale, total ESM funding for the year will be broadly in line with the E7bln annual target)
• Books in excess of E18.5bln (exc. JLM interest)
• Final terms set earlier: MS + 31bps (Guidance was MS +34bps area)
• Hedge ratio: 98% vs 2.50% Feb-35 Bund (DE000BU2Z049)
• Settlement: Oct. 21, 2025 (T+5)
• ISIN: EU000A1Z99W5
• Bookrunners: HSBC, MS (B&D), Natixis
• Timing: Hedge deadline 11:55BST / 12:55CET

Source: Bloomberg / MNI colour.

The NFIB small business survey saw a small decline in business confidence in September, with supply chain and inflation issues taking more prominence again after a dovish August report. Of note, the share expecting to increase prices over the next three months ticked back close to recent highs seen in June, more clearly consistent with above target inflation. 

• The NFIB small business optimism index surprisingly fell 2pts in September to 98.8 (cons 100.6) after 100.8 in August, its first decline in three months for its lowest since June.
• From the overview (link): “While most owners evaluate their own business as currently healthy, they are having to manage rising inflationary pressures, slower sales expectations, and ongoing labor market challenges. Although uncertainty is high, small business owners remain resilient as they seek to better understand how policy changes will impact their operations.”
• “Supply chain and inflation issues stood out as a key problem in the report.” Indeed, price metrics bounced in this latest September survey after a dovish backdrop to August’s report.
  • Specifically, the net share raising average selling prices compared to three months ago bounced back 3pts to 24% after the 21% reported in August was the lowest since Oct 2024. It averaged 23% in 2024 or ~12% pre-pandemic.
  • The net share expecting to increase prices over the next three months meanwhile increased 5pts to 31%, close to June’s recent high of 32% after the 26% in August was its joint lowest since Sep 2024. This series averaged 28% in 2024 and 22% pre-pandemic, although it does of course remain far below some sustained readings in the 50s in 2021/22.
• “In September, 64% of small business owners reported that supply chain disruptions were affecting their business to some degree, up 10 points from August.”
• The already released jobs figures (link) had noted that “a seasonally adjusted 32% of all small business owners reported job openings they could not fill in September, unchanged from August. The last time unfiled job openings fell below 32% was in July 2020. […] A seasonally adjusted net 16% of owners plan to create new jobs in the next three months, up 1 point from August and the fourth consecutive monthly increase. Hiring plans are at their highest level since January.”

Broader risk-off flows surrounding increased Sino-U.S. trade tensions drive German bond outperformance vs. swaps today, with long end spreads leading the move.

• The German 10-Year swap spread trades back above parity and is set to register the highest close since July at prevailing levels. Meanwhile, the 30-Year swap spread sticks within its recent range.
• Bund ASWs also rally, printing the highest levels seen since early August.
• While an increase in German issuance and the ECB’s QT factored into the removal of bond scarcity, today’s move underscores the safe haven appeal of German paper, even with issuance set to increase.
• Zooming out, the move away from cycle/all-time lows in swap spreads & ASWs signal that the market is seemingly a little more at ease with the incoming jump in issuance, which wasn’t as immediate as feared back in March.
• This comfort is further bolstered by the skew away from the long end when it comes to the increased German funding needs and the DFA’s lack of willingness to launch 50-Year issuance at this stage.
• Ongoing questions surrounding the quantity of viable projects to be financed by the increased fiscal support have also removed related pressure for Bunds over a multi-month horizon.