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EGBS: Spreads To Bunds Tighten On Equity Rally, French Politics

EGBS
BulletEurozoneFixed Income BulletsMarkets

EGB spreads to Bunds have continued to tighten this morning, aided by strength in European equities and a lack of escalation of French political uncertainty.

  • The 10-year OAT/Bund spread is 3.5bps tighter today at ~74bps, now almost 15bps below Monday’s closing levels.
  • In an address yesterday evening, President Macron vowed to complete his 5-year term (to 2027) in full. Meanwhile, the centre-left PS’ First Secretary, Olivier Faure, said that his party was ready to negotiate with the centrist Ensemble bloc supportive of President Emmanuel Macron and the conservative Les Republicains in an effort to form a gov't.
  • The BTP/Bund spread has similarly narrowed, now ~2.5bps tighter today at 106bps.
  • These spread-related moves have weighed on German paper, with 10-year Bund yields 1bp higher today.
  • Bund futures are -11 ticks at 136.00, with initial support the Nov 29 low at 135.93.
  • Eurozone final Q3 GDP confirmed flash estimates at 0.4% Q/Q, while compensation per employee fell to 4.4% Y/Y (vs 4.7% prior).
  • Market focus turns to the US labour market report at 1330GMT/1430CET. 
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EGB spreads to Bunds have continued to tighten this morning, aided by strength in European equities and a lack of escalation of French political uncertainty.

  • The 10-year OAT/Bund spread is 3.5bps tighter today at ~74bps, now almost 15bps below Monday’s closing levels.
  • In an address yesterday evening, President Macron vowed to complete his 5-year term (to 2027) in full. Meanwhile, the centre-left PS’ First Secretary, Olivier Faure, said that his party was ready to negotiate with the centrist Ensemble bloc supportive of President Emmanuel Macron and the conservative Les Republicains in an effort to form a gov't.
  • The BTP/Bund spread has similarly narrowed, now ~2.5bps tighter today at 106bps.
  • These spread-related moves have weighed on German paper, with 10-year Bund yields 1bp higher today.
  • Bund futures are -11 ticks at 136.00, with initial support the Nov 29 low at 135.93.
  • Eurozone final Q3 GDP confirmed flash estimates at 0.4% Q/Q, while compensation per employee fell to 4.4% Y/Y (vs 4.7% prior).
  • Market focus turns to the US labour market report at 1330GMT/1430CET.