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Peripheral Paper Wider, BTPs Fail To Extend Below 135bp Vs. Bunds, Long End GGB Issuance Eyed

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A modest uptick in core global FI yields and slightly firmer ECB-implied rates prevent the 10-Year BTP/Bund spread from extending on yesterday’s move below 135bp, with peripheral EGBs generally widening vs. Bunds early today. BTPs also widen vs. peripheral peers at the 10-Year point.

  • Continued ECB guidance for a June cut and Friday’s inaction from S&P re: Italy’s sovereign credit rating promoted BTP tightening over the past couple of sessions. Yesterday’s recovery in broader risk sentiment also factored into the move.
  • Elsewhere in the periphery, the presence of the Greek 30-Year syndication will also be factoring in, with GGBs under the most pressure at that point on the curve.
  • 10-Year IRISH is little changed vs. Bunds over the last 24 hours.
  • A reminder that Ireland forecast a wider ’24 budget surplus on Tuesday, which will be insulating IRISH to a degree.
  • The fiscal dynamics aren’t a particular surprise, with plenty of longstanding sell-side recommendations re: cross-market IRISH tighteners in place.
  • Some of the recently realised and expected Irish tax windfall will be used to set up a sovereign wealth fund. The fiscal improvement will also give the government some room for pre-election spending.
  • The Spring economic update also flagged a slowdown in tax receipts a little further out.
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A modest uptick in core global FI yields and slightly firmer ECB-implied rates prevent the 10-Year BTP/Bund spread from extending on yesterday’s move below 135bp, with peripheral EGBs generally widening vs. Bunds early today. BTPs also widen vs. peripheral peers at the 10-Year point.

  • Continued ECB guidance for a June cut and Friday’s inaction from S&P re: Italy’s sovereign credit rating promoted BTP tightening over the past couple of sessions. Yesterday’s recovery in broader risk sentiment also factored into the move.
  • Elsewhere in the periphery, the presence of the Greek 30-Year syndication will also be factoring in, with GGBs under the most pressure at that point on the curve.
  • 10-Year IRISH is little changed vs. Bunds over the last 24 hours.
  • A reminder that Ireland forecast a wider ’24 budget surplus on Tuesday, which will be insulating IRISH to a degree.
  • The fiscal dynamics aren’t a particular surprise, with plenty of longstanding sell-side recommendations re: cross-market IRISH tighteners in place.
  • Some of the recently realised and expected Irish tax windfall will be used to set up a sovereign wealth fund. The fiscal improvement will also give the government some room for pre-election spending.
  • The Spring economic update also flagged a slowdown in tax receipts a little further out.