UTILITIES: Snam (SRGIM Baa2/A-[N]/BBB+): S&P Upgrade

The bid in EGBs has provided spillover support for gilts.

• Futures as high as 92.12.
• The bearish technical theme in the contract is still intact, with initial resistance at the 20-day EMA (92.28) unchallenged thus far.
• Yields now little changed to 2bp lower, curve flatter.
• Both 2s10s and 5s30s have edged away from cycle highs after failing to close above their respective psychological resistance points (50bp & 100bp).
• 10s lag Bunds, spread ~3.5bp wider at 183bp, underscoring the Bund-led nature of the rally.
• Essentially no movement priced into BoE-dated OIS for this week, 18.5bp showing through May, ~23.5bp through June, ~37.5bp through August and 54bp through year-end.
• We still look for the next cut to come in May.
• SONIA futures effectively flat.
• Macro and cross-market cues are set to dominate early this week, with much of this week’s UK focus set to fall on the BoE decision and labour market data, both due Thursday.
• Note that we haven’t seen a single call for anything other than an unchanged Bank Rate on Thursday, which should leave focus on the vote split and accompanying communication.
• Expect greater detail in our gilt week ahead preview.

The German 5s30s curve has bull flattened 4.3bps this morning, with fresh demand seen across EGBs over the last 90 minutes. 

• Ahead of tomorrow’s Bundestag vote on incoming Chancellor Merz’s fiscal proposals, local media have pointed to the potential for fiscal dissent within the CDU/CSU, SPD & Greens, although the bid was already in play before the latest speculation surrounding that issue did the rounds (note similar stories were already apparent over the weekend).
• This is probably a contributing factor to the bid, although the derailing of the fiscal reform seems unlikely at this stage.
• Bund futures are +63 ticks at 127.86, through the initial resistance point at 127.65. Next resistance of note at the Mar 10 high (128.33).
• 10-year EGB spreads to Bunds are within 1bp of Friday’s closing levels, with meaningful fresh macro cues lacking this morning and Friday’s ratings action coming in broadly as expected. Greece has regained investment grade status from Moody’s (upgrade to Baa3; outlook stable).
• Over the weekend, ECB’s de Guindos continued to express confidence in the inflation outlook, and re-iterated that increased trade tensions “would have a much worse impact on growth than on inflation”. De Guindos also provided similar comments this morning.
• Italian final February HICP confirmed flash estimates at 1.7% Y/Y.

The IFO institute forecasts only 0.2% real GDP growth in 2025, 0.2pp less than at its previous Winter projection. For 2026, IFO sees 0.8% (unchanged).

• The standout is exports, which IFO now project at -3.6% Y/Y this year, 3.8pp less than their prior forecast. This would follow 2024's -1.1% Y/Y. In 2026, IFO sees exports stabilize (but not rebound) at +0.1% Y/Y (-1.9pp vs previous).
• "The German economy is treading water. Despite a recovery in purchasing power, consumer sentiment remains subdued, and companies are also reluctant to invest", IFO comments.
• On the German fiscal measures announced recently, IFO remains a bit sceptical and it appears as though extra defence spending etc is not included in these forecasts: "It remains to be seen if and when they will be implemented." (the cutoff for that assessment might have been before Friday, when CDU/CSU/SPD reached an agreement with the Greens on the deal)
• Sellside analysts appear to agree with IFO's view for 2025, with the median projection for this year seen by MNI also standing at 0.2% Y/Y. That median saw a downward revision of 0.1pp during the last month and was unchanged during the two months prior.

Elsewhere, IFO forecasts the following:

• Unemployment rate 6.2% 2025 (0.1% below previous est.), 6.0% 2026 (0.2pp below previous est.). Was 6.0% in 2024.
• Core CPI 2.5% 2025 (0.2% below previous est.), 2.1% 2026 (unchanged). Was 2.9% in 2024.