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OAT: Wider As Armand Highlights Fiscal Fragility

OAT
CEEMEAEurozoneFranceBulletGlobalFixed Income BulletsRegionMarkets

OAT spread widening seen over the past couple of hours, with OAT/Bunds moving from 76bp to 79.5bp, just below the 80bp mark that was tested on Monday.

  • Fiscal headwinds continue to undermine French paper, with Finance Minister Armand noting that the deficit ratio could top 6% this year.
  • A reminder les Echos sources previously pointed to a deficit ratio of around 6%, with Armand’s contents adding further weight to that report.
  • Armand also stressed the difficulty faced by France, noting that current growth levels do not give the government any spending room.
  • As a result, he pointed to the need to curb spending before implementing any targeted tax moves on companies & the wealthy.
  • 10-Year Spain/France/Portugal fly back towards cycle closing lows of -20.8bp, last -20.0bp.
  • We have previously suggested that there isn’t much of a case for any sustained OAT performance in the immediate term, on account of the French fiscal headwinds and apparent fragility of the newly formed government.
  • This, coupled with positive fiscal trajectories in the periphery/Ireland, leaves many of sell-side holding/recommending various OAT widener expressions.
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OAT spread widening seen over the past couple of hours, with OAT/Bunds moving from 76bp to 79.5bp, just below the 80bp mark that was tested on Monday.

  • Fiscal headwinds continue to undermine French paper, with Finance Minister Armand noting that the deficit ratio could top 6% this year.
  • A reminder les Echos sources previously pointed to a deficit ratio of around 6%, with Armand’s contents adding further weight to that report.
  • Armand also stressed the difficulty faced by France, noting that current growth levels do not give the government any spending room.
  • As a result, he pointed to the need to curb spending before implementing any targeted tax moves on companies & the wealthy.
  • 10-Year Spain/France/Portugal fly back towards cycle closing lows of -20.8bp, last -20.0bp.
  • We have previously suggested that there isn’t much of a case for any sustained OAT performance in the immediate term, on account of the French fiscal headwinds and apparent fragility of the newly formed government.
  • This, coupled with positive fiscal trajectories in the periphery/Ireland, leaves many of sell-side holding/recommending various OAT widener expressions.