Brisk Start For IG Supply Helps Cap Rally

A brisk start from the day for €IG supply, coupled with the presence of the already tabled German sovereign supply, helps keep the early rally in EGBs in check.

• Bund futures back away from best levels to last trade +35. while the major German cash benchmarks run 1.0-2.5bp richer across the curve, with the intermediate zone leading and the wings lagging.
• Most EGB curves see similar moves.
• The core/semi-core & peripheral 10-Year EGB spreads vs. Bunds that we actively monitor sit within -/+1bp of Monday’s closing levels.
• In the background it is worth noting that the German cabinet will be on a 2-day retreat is Meseberg, with the latest spending deadlock issue resolved yesterday, focus will turn to rhetoric around the country’s “growth opportunities.”
• Elsewhere, Italian PM Meloni indicated that support for families will be a key pillar of her ’24 budget, while the Italian government approved a decree to take a stake in the Telecom Italia grid, as it continues to look to strengthen oversight/control of key infrastructure.
• At the EU level, the FT has reported that “EU funding to shore up Ukraine is being held up by fractious disagreements among member states, with worries about strained national budgets and rising costs in Brussels threatening the flow of financial support to Kyiv.”