MNI China Daily Summary: Thursday, July 4

MNI BRIEF: China Has Four Months To Negotiate EU EV Agreement

RPT-MNI INTERVIEW: ISM Choppiness Not A Clear Signal For Worry

MNI: PBOC Net Drains CNY98 Bln Via OMO Thurs; Rates Unchanged

MNI: PBOC Sets Yuan Parity Lower At 7.1305 Thurs; -0.79% Y/Y

CHINA PBOC CONDUCTS CNY2 BILLION VIA 7-DAY REVERSE REPOS THURS

Factory Orders Decline as Non-EU Orders Dip

DMP survey increases probability of August cut

MNI: UK JUNE CONSTRUCTION PMI 52.2 (FCST: 54.0); MAY 54.7

RPT-MNI: Canada Sticks To Fiscal Anchors, Spends Chunk Of Windfall

MNI BRIEF: Poilievre Calls QE 'Scam' And Would Limit BOC Remit

© 1982-2024 MNI. All rights reserved.
Terms | Privacy
Log Out
Free Trial

/OATS: Political Uncertainty Pushes OAT Spreads Wider, CDS To Fresh Multi-Month Highs

FRANCE
HomepageBond Market NewsBulletMarketsFixed Income BulletsForeign Exchange Bullets

French CDS widening extends as speculation surrounding President Macron’s future picks up and OATs widen further.

  • The Élysée has denied suggestions that Macron is considering his future.
  • The benchmark French 5-Year CDS contract has moved to levels not seen since November, but still lags the degree of the relative move in OAT/Bund spreads.
  • Movement in (the more liquid) 5-Year CDS measures covering the big French banks is more limited, with ’24 ranges comfortably intact. YtD highs are some distance away there.
  • Note that the 10-Year PGB/Bund spread is now just ~3bp away from parity. Iberian/OAT spread tighteners have been a favoured sell-side play in recent times, owing to fiscal/ratings divergence.
  • French fiscal worry remains evident at this juncture, while political paralysis in the case of an RN election victory and Macron staying on (known as “cohabitation”) could limit the ability to adjust fiscal spending.
  • As a result, both Moody’s & Morningstar have issued notes of caution surrounding heightened political uncertainty.
  • Furthermore, RN promises in previous election cycles included boosting fiscal spending, this will also be factoring into the move.

Fig. 1: 10-Year OAT/Bund Spread Vs. French 5-Year CDS

Keep reading...Show less
208 words

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.

French CDS widening extends as speculation surrounding President Macron’s future picks up and OATs widen further.

  • The Élysée has denied suggestions that Macron is considering his future.
  • The benchmark French 5-Year CDS contract has moved to levels not seen since November, but still lags the degree of the relative move in OAT/Bund spreads.
  • Movement in (the more liquid) 5-Year CDS measures covering the big French banks is more limited, with ’24 ranges comfortably intact. YtD highs are some distance away there.
  • Note that the 10-Year PGB/Bund spread is now just ~3bp away from parity. Iberian/OAT spread tighteners have been a favoured sell-side play in recent times, owing to fiscal/ratings divergence.
  • French fiscal worry remains evident at this juncture, while political paralysis in the case of an RN election victory and Macron staying on (known as “cohabitation”) could limit the ability to adjust fiscal spending.
  • As a result, both Moody’s & Morningstar have issued notes of caution surrounding heightened political uncertainty.
  • Furthermore, RN promises in previous election cycles included boosting fiscal spending, this will also be factoring into the move.

Fig. 1: 10-Year OAT/Bund Spread Vs. French 5-Year CDS

Keep reading...Show less