- An imminent accident happening in Greece has been averted but the question for next year’s funding still remains open. In light of the ongoing political debate, and some disconcerting headlines regarding Spain in particular, initial intra-EMU spread recovery has hit resistance. Valuations should remain headline driven today with the macro calendar relatively empty. Fed Chairman Bernanke should catch some attention against the backdrop of the recent streak of weak data.
- Today will see re-openings in the Austrian 10y and 30y sector. We see scope especially for the RAGB 4.15% Mar37 to tighten vs. the Bund 4% Jan37 over coming weeks. Belgium has announced a 15y OLO via syndicate in the “near future”.
- The ECB will allot the last weekly refinancing operation for this reserve period. A small net liquidity outflow should still guide EONIA slightly lower. We think a net inflow would be required to bring along the drop currently implied by 1-week EONIA.
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