CREDIT OPEN: Pipeline still thin but broader tone constructive

Having reversed early losses to close firmly higher on Monday, EU stocks currently look set for another day of gains on Tuesday with help from a positive Wall Street lead and also forward progress in Asia.

Notably, those gains in Europe came despite the intense political drama in France where a move by PM Barnier to push through a contested budget bill has set up a potential no-confidence vote which could take place as soon as tomorrow.

With that, OATs conspicuously failed to participate in the ongoing EGB rally seen Monday which took the 10yr German yield lower for an eighth straight day in a move worth a cumulative 31.7bps. That blew the 10yr OAT/Bund spread out to 88bps although how far the spread will widen should the government actually fall remains to be seen.

Over in Asia, the Nikkei is up sharply while China stocks have recovered initial losses that were chalked up to concerns over US tariffs. Expectations of further easing by the PBoC are weighing on the renminbi.

Ahead of that, it was another day of gains for S&P500 (+0.24%) and Nasdaq (+0.97%) with both indices registering record highs, helped by stronger than expected ISM manufacturing data including better than forecast new orders and employment components. Despite the risk on mood, Bitcoin is continuing to struggle to make progress in breaking the phycological 100k barrier, churning around the 96k mark this morning.

Turning to the day ahead and European data is second tier while stateside we get the first of this week’s US labour market anecdotes in the form of JOLTS job opening for Oct which comes after Sep data surprised to the downside.

Released overnight, UK Nov BRC Sales slumped to -3.4% YoY from 0.3% previously & was much worse than the 0.6% expected.

Elsewhere, it’s a busy day for speakers where the lineup comprises ECB’s Cipollone and Panetta along with Fed’s Daly, Kugler & Goolsbee. That all follows mixed Fed rhetoric on Monday from Waller (leaning toward supporting a cut in Dec), Williams (it will be appropriate to continue to move to a more neutral policy setting over time) and Bostic (keeping his "options open" for the Dec).

Auction supply comes at opposing ends of the curve from UK (2054s) and Germany (2026s) although of more import could be what’s coming later in the week where France conducts a sale of ultra-long OATs on Thursday, a day after a possible no-confidence vote.

For more on latest developments see the European Breakfast Briefing

Tuesday’s supply prospects

Coming into the week and respondents in our weekly issuance poll were expecting an average EUR3.5bn (ex-HY Corp) of euro paper to cross the tape this week. Given the low estimates, it was perhaps not a surprise to see IG names stay away from euros on Monday, especially given the shaky opening for markets amid ongoing French political uncertainty. There was, however, a GBP200m (GBP100m retained) secured 12yr on offer from Saltaire Finance, whilst high-yield names Wrist Ship Supply and Momox printed their single currency transactions. More HY names look set to print euros today, as detailed below, but the imminent near-term IG pipeline remains bare.

** Azerion Group EUR300m max tap of the 10.029% Oct 2026 SSN at 100-101 price IPTs
** Mohinder FinCo AB EUR175m secured FRN

Stateside, it wasn’t “12 drummers drumming,” but it was 12 issuers issuing. Considering the pace of high-grade ex-SSA issuance this year – 24.7% more than last year – it’s no wonder that the respondents to our weekly and monthly issuance polls were somewhat optimistic when it comes to issuance this December, a month that for all intents and purposes rarely produces any issuance past the fifteenth of the month. For more colour see THE ENDGAME

What to watch today

** Key Data: SP Nov Unemployment Change (08:00) and US Oct JOLTS Job Openings (15:00)

** Key Events: ECB’s Cipollone (08:00) & Panetta (15:30) along with Fed’s Daly (17:15) Kugler (17:35) & Goolsbee (20:45)

** Auctions: UK to sell GBP2.25bn 2054 Gilts (10:00) and GE to sell EUR4.5bn 2026 Schatz (10:30)

All times GMT

---- Subscribe to read more ----

To receive this analysis plus much more, subscribe to IGM. Request your free trial of the service today.