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OAT: Citi Highlight Risk Of Earlier-Than-Expected Move To 100bp Vs. Bunds

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Citi note that “the 10-Year OAT/Bund spread has underperformed BTPs on beta every day since Le Pen hinted at voting against the Barnier government.”

  • “OATs broke the 80bp level vs. Bunds for the first time since June, as Le Pen reiterated that RN could vote for the censure motion if the budget remains as is. Any such withdrawal of support, alongside the left opposition, would be enough to topple the government.”
  • “If the government were able to secure RN’s support for the budget and survive without conceding on their demands, widening would likely reverse, bringing the spread back to the 70-80bp range.”
  • “In contrast, acceding to RN demands would add to the ‘25 deficit and would set a pattern for the future, reversing only 2-3bp of the widening.”
  • “Finally, if the government falls and the budget is not passed, the spread could move towards our ‘25 target of 100bp sooner than our expectation of Q325.”
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Citi note that “the 10-Year OAT/Bund spread has underperformed BTPs on beta every day since Le Pen hinted at voting against the Barnier government.”

  • “OATs broke the 80bp level vs. Bunds for the first time since June, as Le Pen reiterated that RN could vote for the censure motion if the budget remains as is. Any such withdrawal of support, alongside the left opposition, would be enough to topple the government.”
  • “If the government were able to secure RN’s support for the budget and survive without conceding on their demands, widening would likely reverse, bringing the spread back to the 70-80bp range.”
  • “In contrast, acceding to RN demands would add to the ‘25 deficit and would set a pattern for the future, reversing only 2-3bp of the widening.”
  • “Finally, if the government falls and the budget is not passed, the spread could move towards our ‘25 target of 100bp sooner than our expectation of Q325.”