Halister News

(Bloomberg) -- Supply drops off notably with just EU9b in auctions (EU4m/bp) scheduled for Germany and Italy (linker). Syndication risks loom with Belgium widely expected following recent auction cancellation. Coupon-paying Gilts go ex-dividend on May 26.

• Ascension day on May 25 will see public holidays in many major European countries
• Key data release will be preliminary PMI releases from Germany, France and Eurozone on May 23. In the U.K., focus is on the second release 1Q GDP due on May 25, forecast to be unchanged
• Expectations have been heightened for a new syndicated bond sale from Belgium, in the 15-20y sector, following the cancellation of auctions due on May 22
  • Following the French election outcome, more sovereign syndications are still expected in the coming month, with sales possible from Italy, Austria and potentially Portugal
• Some early month-end flows may emerge towards the end of the week. Citi project the European Govt Bond Index to extend by 0.08y (vs 0.05y avg), and expect 30y France to be major beneficiary of month-end flows, with forecast 0.19y extension for France
• SUPPLY/REDEMPTIONS: Auction supply may total EU9b equivalent to around EU4m/bp or 30k bund futures in risk terms
  • May 23: Germany to sell 06/2019 for EU5b
  • May 23: U.K. to sell 0.125% I/L 11/2036 for GBP0.85b
  • May 24: Germany to sell 0.25% 02/2027 for EU3b
  • May 25: Italy to sell I/L bonds
  • There are no redemptions due, France will pay EU4b in coupons, Barclays writes in a note
• In terms of cash-flows, there are GBP2.45b in coupon payments due on June 7, with GBP1.75b accrued to the 15y+ bonds, these gilts go ex-dividend on 26 May, SocGen writes in a note
• Market impact in gilts is typically felt on the ex-dividend date, and in the period until the cash payment date
• The coupon payments will result in material index extensions. SocGen expect the 15-year+ bucket to lengthen by 0.11 years; then, on June 7, the 4.25% 06/2032 will roll into the sub-15-year sector, which will lengthen the 15-year+ index by 0.62 years
• NOTE: Auction calendar is ECO20 WE

To contact the reporter on this story: Stephen Spratt in London at sspratt3@bloomberg.net To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net David Goodman