GILT PAOF RESULTS: GBP1124.998mln of the 4.375% Mar-30 Gilt sold.

Tesoro Publico has announced it will be looking to sell a combined E5.5-6.5bln of the following Bono/Oblis at its auction this Thursday, April 10:

• the 3.50% May-29 Bono (ISIN: ES0000012M51)
• the 2.55% Oct-32 Obli (ISIN: ES0000012K61)
• the 3.15% Apr-35 Obli (ISIN: ES0000012O67)

Tesoro Publico has additionally announced it will be looking to sell a combined E5.5-6.5bln of the following letras at its auction tomorrow, April 8:

• the 6-month Oct 10, 2025 letras
• the new 12-month Apr 10, 2026 letras

• -2,500 TUM5 104-06.62, sell through 108-75 post time bid at 0738:00ET, DV01 $92,000. The 2Y contract trades 104-07.38 last.

Wage negotiations in the public sector (federal and municipal level, impacting 2.7mln employees, ~6% of total employment) ended with a two-stage salary increase of 3% or a minimum of E110/month retroactively starting on April 1, and a further 2.8% starting May 1 2026, alongside some shift allowance increases and a softening of the maximum working hours in a 27-month contract maturity in March 2027.

• UBS calculates that the public sector wage deal equates to average annual wage growth in the sector of 2.8% in the next two years. We note that this is higher than:
  1. average Y/Y services sector negotiated wage growth 2011-19 (2.4%)
  2. the Bundesbank's forecast for German negotiated wage growth in 2025 (2.5%)
  3. the Bundesbank's forecast for German HICP (2.4% '25, 2.1% '26).
• However, the figures still mark a slower pace of wage growth than seen in recent quarters (services sector excl. one-offs standing at 4.7% Y/Y in March according to Destatis data, see chart below).
• Thus, the takeaway from the deal is that it appears to underpin the ECB's assumption of Eurozone wage growth tapering off going forward - but for the Bundesbank's 2025 forecast to be met, other deals this year have to come in lower than this one, and this agreement remains above pre-pandemic norms.