EGBS: Incoming Spanish & French Supply Drive Early Spread Widening

10-Year spreads to Bunds little changed to 1.5bp wider this morning.

• 10-Year SPGBs and & OATS under the most pressure, both ~1.5bp wider vs. German equivalents.
• Supply-related pressure the clearest explainer of the spread widening, with France, Spain and Finland set to come to market this morning (see recent bullets for greater colour on the French & Spanish auctions).
• OAT/Bunds back out to 73bp, with the Spread failing to test 70bp during recent narrowing episodes.
• The failure to test/break below 70bp indicates that the market remains cognisant of medium-term fiscal and political risks, despite the reduction of near-term uncertainty after PM Bayrou survived a confidence vote in the wake of forcing his ’25 Budget through.
• Indeed, Rabobank remain “biased to OATs underperforming Bunds either as soft French economic growth sees revenues falls short of target or as the government makes additional concessions on the spending front.”