French Politics Continues To Reverberate

Familiar drivers/headline themes remain intact through the NY crossover, with the 10-Year OAT/Bund spread hitting fresh multi-year wides, leaving the EUR on the defensive and broader EGB spreads wider vs. Bunds.

• To recap, uncertainty surrounding French President Macron’s future prompted a fresh round of EGB spread widening flow (despite subsequent denial & reassurances) and pressure for semi-core/peripheral EGBS this morning, also undermining the EUR in FX trade and unsettling European equity indices.
• EUR CDS are wider, as French political matters also factor in there. French financials are under particular pressure as a result.
• Slightly softer-than-expected labour market data out of the UK, coupled with spread related demand for core global FI, provided some insulation for gilts.
• Note that core global FI markets are firmer on the day.
• Scheduled macro risk is light from here, with increased focus set to fall on the U.S. 10-Year Tsy auction after tepid demand at yesterday’s 3-Year offering.
• Tomorrow’s U.S. CPI data and FOMC decision continues to garner the bulk of the macro interest.
• Our Fed preview is available here: https://roar-assets-auto.rbl.ms/files/64701/FedPrevJun2024%20-%20With%20analysts.pdf