EM CEEMEA CREDIT: POLAND: positive read across for renewables players

The 10-year BTP/Bund spread has moved away from intraday highs as European equities find a short-term base, but remains 2.5bps wider at 108bps.

• This morning’s equity-led spread widening was exacerbated by ECB Executive Board member Schnabel’s hawkish interview with the FT (even as Schnabel’s comments were in line with her usual stance).
• The spread briefly marked below 104bps yesterday. The prospect of increased joint EU issuance to fund defence spending may have contributed to Monday/Tuesday’s tightening, alongside broader German fiscal risks ahead of Sunday’s election.
• MNI’s German election preview is here.

The Eurozone seasonally adjusted flash Q4 vacancy rate was 2.5%, unchanged across the last six quarters and down from a peak of 3.3% in Q2 2022. This suggests little scope for further easing of labour market conditions on the demand side, with further loosening (if any) likely to come via the unemployment rate. Unemployment remains close to historical lows at 6.3% as of December.

• The EC’s expected employment index ticked up to 98.8 in January (vs 97.2 prior), but remains below the 2000-2019 average of 99.5.
• Meanwhile, Eurozone business economy flash Q4 labour costs  - also released today - eased to 4.1% Y/Y (vs 4.6% prior) for the lowest since Q3 2022. This is consistent with the ECB’s expectations for decelerating compensation growth, which should eventually feed through into services inflation.
• However, we caveat that Eurostat has to estimate multiple components (e.g. compensation, hours worked) using partial/preliminary data from member states to calculate the flash labour cost data, which makes it prone to revisions in the final release.

• Size: E3bln (MNI expected E2.5-3.5bln)
• Books closed (pre-rec) in excess of E9bln (incl. E460mln JLM interest)
• Spread set earlier at MS+130bps (guidance was MS + 140bps area)
• Maturity: 27 February 2040
• Settlement: 27 February 2025 (T+6)
• ISIN: SK4000026845
• Bookrunners: HSBC (DM/B&D) / JPM / Slovenska sporitelna (Erste Group) / Tatra banka (RBI Group)
• Timing: Books closed at 12:00GMT / 13:00CET, allocations and pricing to follow