Last week, the EUR IG credit index was -4bp better WoW, as markets cheered positive developments in the Middle East while weaker than expected data in the US contributed to price additional 10bp of cuts into year end. In this context, Financials outperformed at -4.5bp WoW to 96.4bp, while Industrials and Utilities were -3.8bp and -3.1bp respectively.
Within financials, SP bonds tightened by 2.2bps overall, with core regions rebounding from recent underperformance (AT -4.7bp, NL -4.0bp, BE -3.9bp) and BPSIM 5.5% ’28 reached its tightest level of the year at 59bps after a strong 18bp WoW tightening. SNP bonds tightened by 2.4bps WoW, showing similar regional patterns as SPs, though shorter maturities (1–3 years) outperformed, particularly in French and Italian names which tightened up to 6bps WoW. Tier 2 bonds were -2.8bps tighter at 145bps, with MONTE 10.5% ‘29 tightening by 21bps, despite the announcement of a new €500mn 10.25NC5.25 issue that saw solid demand although printing inside our fair value. AT1s outperformed at -13bps WoW to 340bps. TPIER 8.75% was the best performer, tightening by 26bps despite the €400mn new issue launched on Monday. Deutsche Bank also outperformed across the curve, with higher-reset instruments faring better than lower-reset ones.
Main events from last week:
- On Thursday, the U.S. Treasury officially confirmed that Section 899 will be removed from the major legislative package currently progressing through Congress, following earlier media speculation. This follows a deal with G-7 countries under which U.S. companies will be excluded from certain foreign taxes such (as OECD Pillar 2 levies) in exchange for dropping the retaliatory S899 provisions.
- Monte dei Paschi received approval from the ECB to proceed with its offer for Mediobanca. As part of the authorization, the ECB stipulated that if MPS acquires less than 50% of Mediobanca’s capital, it must present a strategic plan within 3 months outlining how it intends to manage the minority stake and whether it plans to increase its holding in the future.
- Unipol, which holds approximately 20% stakes in both BPER and Sondrio, has confirmed that its Board has approved BPER’s takeover offer for Sondrio and will tender its shares.
- Last Friday, the US Federal Reserve Board released the results of its 2025 annual bank stress test. As in previous years, the exercise included the US branches of UBS, BACR, and DB, which accounted for 41.7%, 36.7%, and 17.7%, respectively, of their consolidated groups’ FY24 revenues.
- Mediobanca released its new strategic plan on Friday as its latest defence move against the BMPS hostile offer. With this, Mediobanca is trying to position itself as a high-margin, low-risk, capital-efficient bank, accelerating its transformation into a leading Wealth Management-centric institution. Check pg.4 of the report for more info.
Events-wise, the week ahead will be marked by the ECB’s Sintra forum on central banking with governors from the Fed, BoE, ECB and BoJ as the main participants (with them all sharing a panel on Tuesday), as well as the US “One, Big, Beautiful Bill” approaching the end of Trump’s targeted signing date deadline (4th of July), with both Senate and House of Representative final votes still being due.
In addition, we will get several data releases during the week, with German and Italian CPI as well as UK GDP on Monday, European and US manufacturing PMIs on Tuesday, Italian and Spanish unemployment figures and US ADP employment numbers on Wednesday, Eurozone services PMI and US NFP and IJC on Thursday and, during the US Independence Day holiday, Eurozone PPI on Friday.