Deutsche Bank-Fixed Income Blog EGBs Relative Value Corner-117660736

T2se3r0Ot6kwoPaT2se3r0Ot6kwoPaDistributed on: 05/09/2025 17:37:07 GMTDistributed on: 05/09/2025 17:37:07 GMT5 September 2025Deutsche BankResearch Emerging Europe Europe Global Rates Fixed Income Blog Date The main focus in EGBs space has been the political developments in France ahead of Monday's confidence vote. We expressed our thoughts around OATs in our recent piece OATs: Better pricing, Reduced upside. The main argument is that compared to last year's political uncertainty, OATs are much better priced and are already trading cheap relative to France's fundamentals as is shown in our Twin Deficit Model section. Moreover, even though the 10yr OAT/Bund spread is still 7-8bp away from last year's peak, the spread of OAT/Bund vs the average EGB spread (ex OAT) is at new highs, illustrating OATs' recent relative cheapness. All-in-all, we think that even after the recent 3bp tightening in OAT/Bund spread there's still a lot of bad news already embedded in current OAT valuations. As such we think that last year's peak in OAT/Bund of around 80-85bp should be this year's ceiling. We have extended our target on the 10yr BTP/OAT compression trade to flat with a stop at 15bp.Outside OATs, we've seen limited contagion to other EGB spreads. The average EGB spread vs Bund (ex OAT) is almost back to where it was trading before the French news came out. As is usually the case, OLOs are being impacted a bit more by OATs contagion. Overall though, this remains mostly an idiosyncratic French story.Finally, it is worth noting that syndications have resumed, with Austria, Finland, and Italy issuing four new bonds in the past three weeks, consistent with our H2 2025 syndication forecast. Beyond these nations, the Netherlands and Portugal still have one more syndication remaining against their pre-announced targets, while Spain could also issue bonds via syndication later this year. We also just published a detailed analysis on who bought EGBs in H1 2025 following the global reallocation narrative. Our report shows the emergence of EA banks as the main buyers of EGBs in H1 2025 relative to 2024, at the expense of non-EA investors. Ioannis SokosStrategist+44-20-754-75680Mingyue XinStrategist+44-20-754-10002Deutsche Bank AGIMPORTANT RESEARCH DISCLOSURES AND ANALYST CERTIFICATIONS LOCATED IN APPENDIX 1. UNTIL 19th MARCH 2021 INCOMPLETE DISCLOSURE INFORMATION MAY HAVE BEEN DISPLAYED, PLEASE SEE APPENDIX 1 FOR FURTHER DETAILS.EGBs Relative Value Corner5 September 2025Fixed Income BlogPage 2Deutsche Bank AGFigure 1: OATs are trading at record cheap levels vs other EGBs-30.0-20.0-10.00.010.020.030.040.0Jan-24Apr-24Jul-24Oct-24Jan-25Apr-25Jul-2510y OAT/Bund vs AvgexOAT EGB Spread Source : Deutsche Bank, Bloomberg Finance LP5 September 2025Fixed Income BlogDeutsche Bank AGPage 3EGB recent movesFigure 2: Recent moves in 10y EGB spreads vs Bund-10.0-5.00.05.010.015.010y EGB Spreads - Recent Moves5d10d20dSource: Deutsche Bank, Bloomberg Finance LPFigure 3: YTD cha