PLN: Zloty Extends Gains, Fiscal Situation Remains Under Scrutiny

• The Initial Yield Level in the UK 10yr has held perfectly, this was seen at 4.80%, which equated to 89.80, printed a 89.82 low and a 4.793% high so far on the day.
• As investors price less cut but also demand higher Yields on Borrowing cost, and Growth concerns, the next big Yield level would be seen at 4.921%, this was the 2025 high and the highest printed level since July 2008.

Today, reference 90.03:

• 4.921% = 88.75.

This morning, Germany will hold a Schatz auction. On offer will be E4.5bln of the 1.90% Sep-27 Schatz.

• The E4.5bln size is in line with recent Schatz re-opens.
• Contrary to other segments of the German curve, Schatz primary demand appears to have been solid recently. The last auction on August 5 saw a 2.51x bid-to-cover (BTC) and a 1.97x bid-to-offer (BTO) - these compare to 1.69-2.92x BTC and 1.29-2.63x BTO ranges seen this year, respectively.
• Domestically, the government's fiscal plans until 2029 should be well digested by markets by now, while the focus turns towards any announcements of "structural reforms" which the coalition plans to float in autumn. The short end of the German curve meanwhile was driven this morning by an interview of hawkish-leaning ECB's Schnabel (Schnabel Interview Contains Unsurprising Hawkish Themes).
• The next German auction will be tomorrow's E5bln of the 2.60% Aug-35 Bund (ISIN: DE000BU2Z056), while the 1.90% Sep-27 Schatz will be next re-opened on 23 September, for E4.5bln.
• Timing: Results will be available shortly after the bidding window closes at 10:30BST / 11:30CET.