ITALY T-BILL AUCTION RESULTS: 2/12-Month BOTs

The Norwegian finance ministry revised its 2025 mainland GDP growth projection down by 0.3pp to 2.0% Y/Y compared to its October forecast round, while the 2026 mainland GDP projection was revised a tenth higher to 2.2%. The softer outlook for 2025 reflects a sharp downward revision to housing investment (-4.7% vs 12.1% in October), which was offset a little by upgrades to consumption and government spending.

• The 2025 GDP forecast (including offshore sectors) was 0.6% Y/Y (vs 2.1% in October), reflecting much lower crude oil and natural gas export expectations (-2.0% Y/Y vs 1.5% in October).
• The registered unemployment projections were revised a tenth lower for 2025 and 2026 to 2.1%.
• Today’s forecast updates come as the Government kicks off work for the 2026 state budget.
• From the press release: “Next year's budget will be characterized by the fact that we live in turbulent times, with the ongoing war in Ukraine, international unrest and the risk of increasing trade conflicts”….“We must strengthen our defense to secure Norway.
• “Next year's budget must be based on the fact that growth is on the rise. The government will pursue a responsible economic policy that facilitates a further decline in price inflation, increased purchasing power for households, and strengthened competitiveness for companies”.

• Guidance: 0.125% Aug-48 linker (GB00BZ13DV40) + 1.0/1.5bps
• Size: GBP benchmark
• Maturity: 22 September 2049
• ISIN: GB00BT7J0134
• Coupon: 1.875%, long first
• Settlement: 12 March 2025 (T+1)
• JLMs: BofA Securities, J.P. Morgan, Lloyds Bank Corporate Markets (B&D/DM), and UBS Investment Bank
• Timing: Books open, pricing later today (MNI expects books to close at 10:00GMT)

From market source

The 10-Year gilt/Bund spread is on track for its first sub-180bp close since September, with German fiscal expectations continuing to drive cross-market moves after the Greens raised hopes of an accord being struck this week.

• Next support of note in the spread located at 175bp, which protects the 76.4% retracement of the July ’24 to December ’24 widening (174.5bp).
• The speed of delivery (expected to be skewed into H225), size and maturity mix of any fiscal loosening-driven issuance out of Germany will be key for the spread over a multi-month horizon, as will the evolution of UK fiscal policy, given the erosion of already limited fiscal headroom.

Fig. 1: 10-Year Gilt/Bund Spread (bp)

Source: MNI - Market News/Bloomberg