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EGBS: OATs Outperform Following Government Collapse, Regional Data Mixed

EGBS
BulletEurozoneFixed Income BulletsMarkets

The 10-year OAT/Bund spread is over 3bps tighter at ~80bps, with French paper outperforming following the collapse of the minority government yesterday evening. 

  • This morning’s spread tightening probably stems from far-right leader Le Pen highlighting her desire to find a Budget outcome that works for all. She also stopped short of calling for President Macron’s resignation (though the latest Le Point poll showed 54% of respondents are in favour of such an outcome).
  • Broader spreads to Bunds have tightened alongside OATs, with European equities trading higher.
  • Bund futures are -14 ticks at 136.59, still within yesterday’s range. German cash yields are 1-2bps higher.
  • Spanish and French supply was digested smoothly, though auction sizes were smaller than recent months (in line with December norms).
  • German factory orders and Spanish industrial production were stronger than expected in October, though French industrial production and Eurozone retail sales were weaker – none were market movers.
  • The remainder of today’s regional calendar is light, leaving focus on this afternoon’s US data and the OPEC+ meeting.
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The 10-year OAT/Bund spread is over 3bps tighter at ~80bps, with French paper outperforming following the collapse of the minority government yesterday evening. 

  • This morning’s spread tightening probably stems from far-right leader Le Pen highlighting her desire to find a Budget outcome that works for all. She also stopped short of calling for President Macron’s resignation (though the latest Le Point poll showed 54% of respondents are in favour of such an outcome).
  • Broader spreads to Bunds have tightened alongside OATs, with European equities trading higher.
  • Bund futures are -14 ticks at 136.59, still within yesterday’s range. German cash yields are 1-2bps higher.
  • Spanish and French supply was digested smoothly, though auction sizes were smaller than recent months (in line with December norms).
  • German factory orders and Spanish industrial production were stronger than expected in October, though French industrial production and Eurozone retail sales were weaker – none were market movers.
  • The remainder of today’s regional calendar is light, leaving focus on this afternoon’s US data and the OPEC+ meeting.