OIL: China Teapot Run Rates Fall Further to 43.2%

• Guidance: 3.45% Oct-34 Obli (mid) +8bp area
• Size: EUR benchmark (MNI expects E10-15bln)
• Maturity: 30 April 2035
• Coupon: Short first
• ISIN: ES0000012O67
• Settlement: 29 January 2025 (T+5)
• Bookrunners: BBVA, CACIB, DB (B&D/DM), JPM, MS, SANTANDER
• Timing: Books open, today's business

From market source

• French OAT and the BTP have been helping the German Bund back through its opening gap, small immediate resistance was seen at 132.14 Yesterday, and the contract printed a 132.15 high, this remains.
• Above that area, it opens to 132.41, but better is seen at 132.57.
• The price action is pushing the BTP/Bund spread towards 106.16bps, the December low, and tightest printed spread since October 2021.

(Chart source: MNI/Bloomberg):
 

Citi note that “EGB supply pressure has likely peaked. There also seems little EGB supply indigestion so far. While these concerns remain, we find the overall risk-reward tilted supportive towards EMU periphery vs swaps.”

• They “especially like PGBs for this given we don’t expect the next syndication until April and today’s buyback absorbs some of the duration. This informed our recommendation last week to buy 20yr PGBs vs. swaps following the underperformance of the sector on the curve.”