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Citi On EU Index Inclusion Matters

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Citi note that “following the MSCI consultation announcement on the possible inclusion of EU in its government bond indices, EU bonds tightened by 2-4bp vs. swaps and 1-3bp vs. OATs.”

  • “This has further added to the strong performance since a similar ICE announcement on 11 April.”
  • “Whilst part of this could be explained by positioning (which is hard to quantify), the post-11 April price action suggests that inclusion could be worth 5-10bp.”
  • “However, this can change very quickly depending on EU’s issuance plans for H224 and for 2025-26.”
  • “If the EU is to complete NGEU by the end of 2026 (which is stipulated by the RRF Regulation), it has a lot of catching up to do: At the time of writing, EU countries have fulfilled only 18% of the targets and milestones required for RRF disbursements.”
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Citi note that “following the MSCI consultation announcement on the possible inclusion of EU in its government bond indices, EU bonds tightened by 2-4bp vs. swaps and 1-3bp vs. OATs.”

  • “This has further added to the strong performance since a similar ICE announcement on 11 April.”
  • “Whilst part of this could be explained by positioning (which is hard to quantify), the post-11 April price action suggests that inclusion could be worth 5-10bp.”
  • “However, this can change very quickly depending on EU’s issuance plans for H224 and for 2025-26.”
  • “If the EU is to complete NGEU by the end of 2026 (which is stipulated by the RRF Regulation), it has a lot of catching up to do: At the time of writing, EU countries have fulfilled only 18% of the targets and milestones required for RRF disbursements.”