EURi: Inflation recovery extends as bank gains drive risk-on

Chart numbers candles 14 Jun 2022
Euro inflation extended yesterday's bounce as a recovery in the banks supported risk-on.

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  • Risk-on bull-flattening

  • Livret A inflows remain strong for a second month

  • New issues: Goldman Sachs


    Risk-on bull-flattening

    Euro inflation today extended the recovery that kicked off on Monday in the wake of the shotgun marriage of CS and UBS. The rally pulled EUR 5y almost 10bps higher to just under 2.50% (versus 2.69% a week ago) while EUR 5y5y rose by 7bps to 2.35% as the inflation curve bull-flattened.


    Across the board gains arrived for risk assets with the Euro Stoxx up 1.6% accompanied a surge in UBS (+12.1%) and First Republic (+42%) shares. Nominals bear-flattened as EURIBORs fell by 25 ticks, Brent rose 80 cents and gas futures rose by 6%, while TIPS breakevens widened by 5-10bps. Core euro linker real yields rose by 2bps to 9bps led by the front end.      


    EUR 5y began trading at 2.42% today and went through last at 2.477% according to the   SDR, with the screens showing the swap higher at around 2.4875% at the close.  Shorter in, EUR 1y traded at 3.52% late in the day and EUR 3y dealt at 2.635%, both in €100m. FRF 30y traded in small size at 2.865% late in the day and FRF 10y traded at lunchtime at 2.7675% (or possibly at +38.5bps versus EUR 10y).  


    Livret A inflows remain strong for a second month

    CDC today reported a second month of strong inflows into Livret A and LDDS accounts. A net rise of €8.2bn in February took the total outstanding to €529bn, €49bn (10%) higher than a year earlier. The surge follows an increased in the Livret A rate to 3% last month.


    Despite the headline, French inflation mildly underperformed euro today with the 5y5y spread indicated about 0.5bp tighter at 35.5bps.  


    New issues: Goldman Sachs

    • Goldman Sachs launched a €50m (max) inflation-linked EMTN due 21 Apr 2028 at par. The notes pays 5.6% fixed for the first year and then pays euro HICPx inflation flowed at 0%. Self-led.