PLN: Zloty Edges Lower, MPC's Dabrawski Draws Attention To Wage Growth
Jul-11 08:46
EUR/PLN trades at 4.2558, up 33 pips on the day. The 50-DMA (4.2557) is again approaching the 200-DMA (4.2553) after crossing above it in early June, which creates potential for a death cross, keeping bears on alert. Meanwhile, a sell-off through the 100-DMA (4.2376) would open up May 15 low of 4.2230. Conversely, bulls look for gains towards Apr 16/Dec 25 highs of 4.3102/4.3114.
- MPC's Ireneusz Dąbrowski told Newseria that wage growth is the decisive parameter determining the outlook for monetary policy. He reiterated that in his view, nominal wage growth should slow to around +6% Y/Y to be a 'safe rate for inflation'. At the same time, the MPC is also looking at fiscal policy and global geopolitical risks. Dąbrowski said that he was in favour of launching a rate-cutting cycle in late Q3 or Q4, while seeing the terminal rate at 3.5%.
- Prime Minister Tusk confirmed that the Cabinet reshuffle has been delayed until after July 22. Meanwhile, the turmoil around and within junior coalition party Poland 2050 continues after its leader Szymon Hołownia held a controversial meeting with opposition Law and Justice's Jarosław Kaczyński.
- POLGB yields sit slightly higher across the curve. The 2-Year/10-Year POLGB spread stays around 100bp after hitting cyclical wides earlier this month.
- Local stock benchmarks tread water, with the WIG Index and WIG20 Index both holding yesterday's losses.
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SWAPS: German ASWs Little Changed Vs. Close
Jun-11 08:39
German ASWs vs. 3-month Euribor within 0.3bp of yesterday’s closing levels.
- Fairly muted reaction to the move higher in outright bond yields.
- Long end swap spreads consolidate much of the recent widening.
- Little visible impact on benchmark ASWs from the impending Bund auction.
- Broader macro sentiment remains key for spreads intraday, while medium-term focus continues to fall on German issuance intentions and the country's fiscal situation.
- The medium-term factors seemingly remain bearish for long end swap spreads, but the highly volatile headline environment that we are operating in at present means that any such weakness in those spreads is unlikely to come in a straight line.
- Pre-existing short positioning in the long end may also provide increased vol. during any rallies.
GERMAN AUCTION PREVIEW: 2.50% Feb-35 Bund
Jun-11 08:33
This morning, Germany will hold a 10-year Bund auction, with E3.0bln of the 2.50% Feb-35 Bund (ISIN: DE000BU2Z049) on offer.
- The size is a step down from the last re-open of the 2.50% Feb-35 Bund on May 21, and is the lowest for an on-the-run reopen in the German 10y segment since November 2022. The 2025 issuance plan saw a reduction in these auction sizes relative to the start of the year, but there is a good chance that when the Q3 issuance plan is solidified we see 10-year auctions increase in size once more (given the expected increase in H2 issuance volumes).
- Demand metrics in German auctions have recovered recently, and that also applies to the 10-year segment. At that last May 21 auction, the bid-to cover came in at 2.42x and the bid-to-offer at 1.85x - a significant improvement from the 1.38x btc / 1.06x bto seen at the auction prior to that (April 23). These metrics compare to a 1.38x - 2.84x range for bid-to-covers and a 1.06x - 2.17x range for bid-to-offers seen in German 10y auctions this year.
- At the last auction on May 21, the secondary market mid-price has also been below the lowprice again - contrary to the two 10y auctions ahead of that.
- The next German auction will be E1bln of the 2.10% Apr-29 Green Bobl (ISIN: DE000BU35025) alongside E500mln of the 2.30% Feb-33 Green Bund (ISIN: DE000BU3Z005) on June 17, while a new Aug-35 Bund will be launched on July 2, for E5.0bln.
- Timing: Results will be available shortly after the bidding window closes at 10:30GMT / 11:30CET.
MNI EXCLUSIVE: French Treasury Chief Economist On Defence Spending Funding
Jun-11 08:28
French Treasury Chief Economist Dorothee Rouzet talks about funding increased defence spending.- On MNI Policy MainWire now, for more details please contact sales@marketnews.com
