CREDIT OPEN: Risk-on start to Thanksgiving week
It’s a risk-on start to Thanksgiving week in Europe with sentiment supported by President-elect Trump's pick for the next treasury secretary in the form of hedge fund manager Scott Bessent. That news was announced following Friday’s Wall Street close which saw S&P500 make it five straight wins in a row.
With that, DXY and UST yields are lower while US index futures are up, all helping to result in a positive handover for European markets today which also enjoyed solid gains Friday. Those gains for EU stocks came as weak service PMI ramped up easing bets to the extent that whether the ECB goes with a 25bps or 50bps cut in Dec is now viewed by markets as a coin toss.
Some EGB yields declined by more than others though where the 10yr Bund yield fell by 7.5bps on the day while the 10yr OAT yield closed 5.6bps lower, with the net result being that the 10yr Bund/OAT spread closed at +80.1bps. According to BBG data, the highest close this year was at 81.9bps on 27th June.
Turning to today’s schedule and the German Nov IFO Business Climate is seen at 86.0 from 86.5 prior. The Current Assessment and Expectations readings are also expected to ease. US data is second tier.
Speakers today comprise ECB chief eco Lane while auction supply comes from the EU who sells EUR 2bn 3% 2034 bonds while the US offers USD69bn 2yr notes.
Otherwise, M&A news is also in the spotlight given UniCredit’s all-share bids for Banco BPM, valuing the lender at just over EUR10bn.
For more on latest developments see the European Breakfast Briefing.
Monday’s supply prospects
On average, a relatively limited EUR12.5bn of euro (ex-HY corp) supply has been forecast by respondents to our latest survey with a currently empty IG pipeline supporting that assertion. That after last week’s EUR25.7bn worth of issuance only just beat the EUR24bn average guess. Despite a jumbo EUR7bn from the European Union, it was the IG corporate sector which led from the front, for the second straight week. The asset class saw another EUR10.85bn price via 17 separate tranches, followed by SSAs with EUR9.9bn (8 lines). Full recap here.
** Arrow Global (Sherwood Financing) EUR450m NC1 FRN (E+550-575 IPTs), EUR250m NC2 FXD (7.75% area) and GBP250m NC2 (9.75% area) three-part
** Azerion Group EUR300m max tap of the 10.029% Oct 2026 SSN
Stateside, on average the Street is thinking we could see as much as USD7bn cross the tape this week, which is shortened of course by the Thanksgiving holiday. However, the bears believe no more than USD2.5bn is on the cards, while the very optimistic are looking for as much as USD15bn, which would push November issuance to the century mark and top the highest monthly average estimate of USD90bn. See the IG WEEKLY WRAP UP.
What to watch today (and for the week)
** Key Data: SP Oct PPI (08:00), GE Nov IFO Business Climate / Current Assessment / Expectations (09:00) and US Nov Dallas Fed Manufacturing Activity (15:30)
** Key events/speakers: BoE’s Lombardelli (09:00) & Dhingra (10:30) speak, as do ECB’s Lane (16:30), Nagel (17:30) & Makhlouf (19:00)
** Auctions: EU to sell up to EUR4bn 2027 & 2034 Bonds (10:30) and US to sell USD69bn 2yr Notes (18:00)
** Viewpoint - The week ahead:
- US Q3 GDP revisions, Oct Durable Goods, Weekly Jobless Claims & Personal Income/Spending (Weds) ahead of the Thanksgiving holiday on Thursday into Friday
- Japan Nov Tokyo CPI, Oct Retail Sales, Industrial Production, Housing Starts & Nov Consumer Confidence (Fri)
- Australia October CPI and RBNZ rate decision (Weds)
- German November IFO survey (Mon), November CPI (Thurs) and November Unemployment Change (Fri)
- Switzerland, Sweden and France GDP figures (Fri)
- CPI data for EZ, France, Germany in the latter half of the week
All times GMT
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