BONDS: Some early Activity
Feb-27 08:51
- Eurex spreads have started to trade this morning, nothing too big, around 19k for Bund, with some likely done on legs.
- Range so far in the Bund spread has stayed in a tight 3 ticks range (87/90, low/high), but expect for these to continue picking up.
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BUNDS: /SWAPS: Schatz/Buxl ASW Spread Pinned Near Cycle Highs
Jan-28 08:48
{GE} BUNDS/SWAPS: Continued outperformance in the front end of ASW spreads has taken the Schatz/Buxl ASW curve to fresh cycle highs near 50bp (based on 3-month Euribor ASWs).
- Increasing free float and fiscal/issuance risks have driven much of the move in the spread.
- The same drivers should continue to limit any widening episodes in long end spreads, although positioning presents some upside risk to long end spreads (in the case that an upside catalyst becomes apparent).
Fig. 1: Schatz/Buxl ASW Spread (Vs. 3-Month Euribor)
Source: MNI - Market News/Bloomberg
BONDS: The German Bund edges to session high
Jan-28 08:37
- As previously mentioned, mostly a two way early price action in Govies, Bund is back at its very tight session high, there's been some buying interest in French OAT, and the shorter end Schatz and Bobl, but very limited impact in Rates (Euribor) since the moves are more risks driven (tariffs, Equities) as oppose to interest Rate.
- The early volume still stands out in the US, but stays fairly subdued in Europe.
GILT AUCTION PREVIEW: 1.125% Sep-35 linker
Jan-28 08:37
- The DMO will kick off issuance for the week this morning by launching the new 10-year 1.125% Sep-35 linker for GBP1.5bln.
- This will replace the 0.75% Nov-33 linker as the on-the-run 10-year issue.
- Auctions for that linker were strong with the lowest bid-to-cover in the five auctions so far this fiscal year at 2.89x (with a mean of 3.16x and 3.39x seen in the last auction in December).
- All of these auctions have been for GBP1.5bln nominal. We expect another strong linker auction. The 1.125% Sep-35 linker is due to be reopened on 25 February.
- Timing: Results will be available shortly after the bidding window closes at 10:00GMT with a further GBP375mln available to successful bidders via the PAOF.
