EGBS: Spreads A Little Tighter, ECB Eyed

Spreads to Bunds tighter (0.5-1.5bp) given the extension higher in equities. BTPs & GGBs outperform.

• Round numbers still in play to the downside in spreads, with OAT/Bunds failing to push meaningfully below 70bp given lingering French fiscal risks, while BTP/Bunds remains above 140bp.
• A reminder that March lows in yields helped limit yesterday’s rally, adding to their significance from a technical standpoint (exact levels covered in earlier bullets).
• EUR 3m10y vol. little changed.
• ECB the dominant input for the Eurozone today, our full preview here: https://roar-assets-auto.rbl.ms/files/67296/ECB%20Preview%20September%202024.pdf
• With a 25bp deposit rate cut unanimously expected, focus will move to the accompanying rhetoric.
• Our baseline scenario looks for President Lagarde to indicate a willingness to cut policy rates further but refuse to be drawn into speculating on the October meeting. Instead, Lagarde is set to reaffirm the data-dependent and meeting-by-meeting approach.