EUROZONE ISSUANCE: EGB Supply - W/C 31 March, 2025 (2/2)
- On Thursday, Spain will hold a Bono/Obli and ObliEi auction. On offer will be the on-the-run 3-year 2.40% May-28 Bono (ISIN: ES0000012O59), the 3.10% Jul-31 Obli (ISIN: ES0000012N43), the 3.90% Jul-39 Obli (ISIN: ES0000012L60) and the 1.00% Nov-30 Obli-Ei (ISIN: ES00000127C8). We look for an upper auction target size of around E5.5-6.0bln for the nominals and a E250-750mln target range for the linker.
- Also on Thursday, France will hold a LT OAT auction. As we expected, the on-the-run 10-year 3.20% May-35 OAT (ISIN: FR001400X8V5) will be on offer alongside the first reopening of the on-the-run 30-year 3.75% May-56 OAT (ISIN: FR001400XJJ3). We had expected a further two LT OATs on offer, but only the 3.50% Nov-33 OAT (ISIN: FR001400L834) will be on offer alongside the on-the-run issues. With only three OATs on offer, we think that explains the slightly smaller auction size of E10-12bln.
- Finally on Thursday, Finland will hold an ORI operation to sell up to E0.4bln. The bonds on offer will be announced the preceding day.
NOMINAL FLOWS: The week ahead sees a single redemption of E2.4bln from a formerly 7-year EU-bond (legacy issuance before SURE/NGEU). Coupon payments for the week total E3.8bln of which E2.4bln are Italian, E1.0bln are from EU-bonds and E0.2bln are from the EFSF. This leaves estimated net flows for the week at positive E24.4bln, broadly cancelling out this week’s negative E24.4bln.
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GILT AUCTION PREVIEW: On offer next week
The DMO has announced it will be looking forward to sell GBP4.25bln of the 4.375% Mar-30 Gilt (ISIN: GB00BSQNRD01) at its auction next Wednesday, March 5.
US DATA: New Home Sales Pull Back, Still Mitigating Existing Home Weakness
New home sales fell much more sharply in January than expected, but this was more than made up for by upward revisions.
- The 657k (SA annualized) of new single-family house sales were below the 680k survey - but December was revised a substantial 36k higher to 734k, meaning the actual 2-month total was 14k higher than the "expected" total.
- Sales fell in each of the 4 geographic regions in January, with the exception of the West.
- In terms of inventory, December now turns out to have had a sharp drop in months of supply (8.0, vs 8.5 pre-revision), but this rebounded sharply to 9.0 months in January.
- Median prices rose 3.7% Y/Y, the strongest since January 2024, to the 2nd-highest monthly price ever $446.3k (non-seasonally-adjusted - the record was $460k in October 2022) - the average in January was $510k.
- Bigger-picture, new home sales were down 1.1% Y/Y, so not exactly dynamic.
- But new homes continue to represent an unusually elevated proportion of supply (30%, vs half that pre-pandemic) and total sales (14-15%, vs 10% or lower pre-pandemic) as existing home sales growth stagnates amid high mortgage rates.
BUNDS: /SWAPS: Commerzbank Reiterate Shorts In Long End ASWs
Commerzbank write “although Schatz ASW spreads remain resilient, Bund ASWs are hitting new lows and even underperform against 30s as markets prepare for persistent fiscal slippage under the new German government. As the game of brinkmanship for fast-tracking new expenditures gathers pace, more volatility could be in store, but Bunds will struggle to regain their 'special' status, regardless of the eventual legislative details to free up fiscal space”.
- They suggest that “combined with converging duration free-floats across the 'pristine' global bond markets this implies further catch-up with U.S. Treasury and Gilt ASW structures”.
- Therefore, they reiterate structural shorts in (ultra-)long Bund spreads, both outright and vs. Schatz.
