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EGBS: Spreads Tighter As Equities and Euribor Recover

EGBS
EurozoneBulletGlobalFixed Income BulletsRegionMarkets

The 10-year BTP/Bund spread holds below 140bps, with the recovery in European equity and Euribor futures from yesterday’s lows helping EGB spreads to Bunds tighten a little this morning.

  • The 140bps handle had provided a floor to the BTP/Bund spread since the 10-year BBG benchmark roll last Monday.
  • The 10-year OAT/Bund also sits just below the 70bps handle, the key support since late-July. French PM Barnier is aiming to have assembled his cabinet by “next week”, though this may not be a foregone conclusion.
  • In addition to political uncertainty, fiscal pressure, related impending deadlines and the upcoming run of sovereign credit rating reviews covering France have limited OAT tightening moves.
  • Moody’s and S&P are scheduled to review Spain’s sovereign credit rating after hours, after Scope delivered an upgrade last week.
  • Danske Bank expect Moody’s to upgrade Spain’s rating to A- from Baa1.
  • The 10-year Spain/Bund spread has struggled to tighten past 80bps over the past 6 weeks, though further positive ratings action could support some further narrowing.
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The 10-year BTP/Bund spread holds below 140bps, with the recovery in European equity and Euribor futures from yesterday’s lows helping EGB spreads to Bunds tighten a little this morning.

  • The 140bps handle had provided a floor to the BTP/Bund spread since the 10-year BBG benchmark roll last Monday.
  • The 10-year OAT/Bund also sits just below the 70bps handle, the key support since late-July. French PM Barnier is aiming to have assembled his cabinet by “next week”, though this may not be a foregone conclusion.
  • In addition to political uncertainty, fiscal pressure, related impending deadlines and the upcoming run of sovereign credit rating reviews covering France have limited OAT tightening moves.
  • Moody’s and S&P are scheduled to review Spain’s sovereign credit rating after hours, after Scope delivered an upgrade last week.
  • Danske Bank expect Moody’s to upgrade Spain’s rating to A- from Baa1.
  • The 10-year Spain/Bund spread has struggled to tighten past 80bps over the past 6 weeks, though further positive ratings action could support some further narrowing.