PLN: Zloty Trims Weekly Gain
EUR/PLN has added 46 pips and last deals at 4.2347, with bulls looking for a continued recovery toward Apr 16/Dec 25 highs of 4.3102/4.3114. However, the pair has become slightly heavy in recent days, with bears eyeing a clean breach of May 15/Oct 22 lows of 4.2230/4.2227.
- Both major political parties hold conventions this weekend. The main opposition Law and Justice (PiS) will focus on policy, laying the groundwork for its 2027 election manifesto. The ruling Civic Coalition (KO) is expected to formally announce the annexation of two minor allied parties, bringing their leaders into the management of the new unified formation.
- Demand at yesterday's POLGB auction was softer than anticipated, with expectations boosted by a strong October 15 offering, the imminent redemption of almost PLN16bn of OK1025 zero-coupon bonds, and the prospect of continued monetary easing by the NBP. When this is being typed, the yield curve runs steeper and sits lower (by 1.5-2.4bp).
- The WIG Index is marginally firmer on the day. Blue-chip WIG20 has added 0.2%.
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EGBS: Spreads To Bunds Wider On Russia-Ukraine Fears; Short End IT Supply Due
10-year EGB spreads to Bunds are up to 1.5bps wider on the session, with BTPs lightly underperforming (spread to Bunds at ~81bps). Concerns around President Trump’s remarks on the Russia-Ukraine conflict yesterday and Russia pointing to further advances in Ukraine this morning may be contributing to peripheral underperformance versus Bunds intraday.
- The BTP/Bund spread has tightened almost 40bps year-to-date, but has struggled to consolidate below the 2010 lows of ~76bps in recent weeks.
- BTP futures are +8 ticks at 119.75, lightly underperforming Bunds (+18 ticks at 128.36). The primary trend condition in BTP futures remains bullish, with the pullback from the Sep 11 considered corrective. Initial support is the Sep 4 low at 119.06, with key support at the Sep 3 low of 118.36.
- Italian short-end (and linker) supply is due at 1000BST, with E2.0-2.5bln of the on-the-run 2.10% Aug-27 BTP Short Term on offer.
- This BTP Short Term was last re-opened in August, where it attracted a 1.56x bid-to-cover ratio for the E3bln on offer.
- The Italian curve is lightly bear flatter ahead of the supply, with 2-year yields little changed and 30-year yields down almost 1bp.
FOREX: FX OPTION EXPIRY
Of Note:
EURUSD 1.39bn at 1.1800 (could act as magnet).
GBPUSD 1.31bn at 1.3500 (could act as magnet).
USDJPY 1.1bn at 148.40/148.50.
AUDUSD ~1bn at 0.6600.
EURUSD 2.32bn at 1.1800/1.1805 (thu).
EURUSD 2.02bn at 1.1750 (fri).
AUDUSD 1.29bn at 0.6625 (mon).
- EURUSD: 1.1730 (628mln), 1.1750 (978mln), 1.1760 (324mln), 1.1800 (1.39bn), 1.1811 (355mln).
- GBPUSD: 1.3500 (1.31bn).
- USDJPY: 147.90 (241mln), 148.00 (296mln), 148.40 (350mln), 148.50 (729mln).
- USDCAD: 1.3850 (540mln).
- AUDUSD: 0.6600 (904mln), 0.6625 (575mln).
- NZDUSD: 0.5890 (351mln), 0.5900 (372mln).
- EURNOK: 11.7500 (405mln).
RBA: VIEW: TD Remove Call For Nov & Feb Cuts, Pay Nov RBA OIS
Sell-side names continue to adjust their RBA calls in a hawkish direction after the latest round of monthly CPI data. TD Securities note that “CPI is running hotter than the RBA would probably like and with activity holding up, this prompts a change of RBA call. We no longer forecast RBA cuts in November and February”. They will issue a full update of their view on Friday. They recommended paying November ‘25 RBA-dated OIS alongside this call change.
