HALISTER1: EU RATES OUTLOOK: EU15b in Auctions; July Cash Flow Supportive

EU RATES OUTLOOK: EU15b in Auctions; July Cash Flow Supportive

(Bloomberg) -- Auction supply next may total EU15b, offset by EU12b in redemptions from Netherlands. Net supply for the month, when including QE flows, remains very negative.
  • Main central bank event for the week is Yellen’s Monetary Policy report to Congress, with initial text release due at 1:30pm London time on July 12; U.S. CPI due on Friday is the key data point
  • For the U.K., only tier 1 release is the labor market report on July 12
  • The supportive cash-flows environment for EGBs through July has been widely highlighted. With and estimated EU42b of QE buying, EU114b in redemptions (highest in 2017) and EU33b in coupons, leaving a large negative cash requirement of around EU122b, according to Citigroup
  • Portugal is said to delay its usual supply announcement window from 1pm London to 4:30pm, meaning a Portugal auction may be added to the next week’s supply
  • SUPPLY/REDEMPTIONS: Auction supply may total EU15b, equivalent to around EU14m/bp or 96,000 bund futures in risk terms
  • July 11: Netherlands to sell 2.75% 01/2047 for EU0.75b-1.25b
  • July 12: Germany to sell new 08/2027 for EU5b
  • July 13: Italy to sell bonds; expected 0.35% 06/2020, 1.85% 05/2024 and long-dated sale for up to EU8b, says Citigroup
  • July 13: Ireland to sell bonds; Commerzbank look for 0.8% 03/2022, 1.7% 05/2037 for up to EU1b
  • There’s EU12b of old Dutch 10-year bonds maturing on July 15, which may be reinvested, which may be reinvested late next week due to T+2 settlement
  • U.K. mandated banks for a tap of 0.125% 2056 gilt linker during week commencing July 10; funding plans suggest GBP4b size, however DMO retains flexibility on upsizing, possible to see a deal size up to GBP5b, depending on the end-user demand, writes RBC in a client note
    • A deal size of GBP4b, would equate to GBP29m/bp in risk terms, or 263,000 gilt futures
  • 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 Keith Jenkins

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