SECURITY: Ukraine "Proximity Talks" To Take Place In Riyadh On Monday (2/2)
Continued: In a joint statement, all EU leaders (except Hungarian PM Viktor Orban) yesterday pledged to "continue to provide Ukraine with regular and predictable financial support", but it is unclear if the EU can provide sufficient support whilst funding their own defence sector boost.
- Lithuania's President Gitanas Nauseda said: "We have to rearm ourselves because otherwise we will be the next victims of Russian aggression."
- The prevailing view is that a broader ceasefire appears remote. Russia’s strong battlefield position and Washington's soft support for Kyiv suggests it is in Moscow’s best interests to hold out for more concessions.
- Putin’s acquiescence to the energy ceasefire appears favourable to Moscow, rather than a concession to Kyiv, as warmer weather makes strikes on Ukraine’s grid less damaging and removes Ukraine's ability to strike Russian oil and gas facilities.
- High-profile Russia experts, including former Trump advisor Fiona Hill, warned that the more experienced Russian team may have the upper hand in driving negotiations.
- Hill said on March 6: “One of the risks that we’re seeing at the moment... in some of the statements from [Trump's] Special Envoy [Steve] Witkoff and others… they’ve taken completely on board both the Russian talking points and the Russian positions.” Hill added that the Russians “are thinking right now that they can manipulate this.”
- Witkoff told Fox this week: “I tend to believe that President Putin is operating in good faith,” adding on the recent Trump-Putin call: “It was these two great leaders coming together for the betterment of mankind.”
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OEH5 117.25/117.75cs, bought for 7.5 in 3k.
BUNDS: /SWAPS: Defence Spending Risks Bearish For Long End Swap Spreads
{GE} BUNDS/SWAPS: German ASWs vs. 3-month Euribor are tighter but trade within 0.5bp of yesterday’s closing levels after debt issuance risks surrounding increased defence spending helped counter the (initially U.S. swap spread-driven) widening seen late last week.
- The Buxl ASW is the only spread which hasn’t fully retraced last week’s move.
- We have suggested that fundamentals point to continued tightening pressure in long end ASW spreads in the medium-term and increased defence spending would add further weight to this idea, as does the potential for debt brake reform.
- More broadly, Commerzbank play down the likelihood any fundamental regulatory shifts within EUR markets, noting note that “while ECB heavyweights are now actively calling for regulatory relief, we doubt that the Leverage Ratio is the binding constraint for € repo intermediation considering GC/specialness dynamics during the past 15 months.”
- As a result, Commerzbank reaffirm their view that “recoveries in (ultra-)long Bund spreads should be used to add to structural shorts.”
Fig. 1: German ASW Spreads (Vs. 3-Month Euribor)
Source: MNI - Market News/Bloomberg
BONDS: US and UK Roll views
These could pick up with Friday's PMIs in mind, and they will be concluded on the 27th for Gilt and 28th Feb for Treasuries.
JPM:
- WNA: Bullish.
- USA: Bullish.
- UXY: Mildly bearish.
- TYA: Mildly bearish.
- FVA: Bearish.
- TUA: Bearish.
DB:
- WNA: Bullish.
- USA: Bullish.
- UXY: Mildly bearish.
- TYA: Mildly bearish.
- FVA: Bearish.
- TUA: Bearish.
Soc Gen:
- WNA: Bearish
- USA: Neutral/Bearish.
- UXY: Neutral.
- TYA: Mildly Bearish.
- FVA: Bearish.
- TUA: Mildly Bearish.
UBS:
- UBS recommend selling Gilt Roll.
