巴黎银行-欧洲-债券市场-2019年欧元政府债券供应和评级审查-20190118-13页.pdf

|FOCUS 17/01/2019 1 We expect 2019 supply to be a headwind for bond markets.While the ECB has repeatedly argued that the stock of central bank balance sheets is more important to yield levels than the flow of QE,we expect a rise in both gross supply less QE including reinvestment,and net supply less QE excluding reinvestments.EGB supply net of QE DV01 proxy suggests a further rise in EGB yields in 2019,even if a large scale Twist in reinvestments were to be conducted(not our expectation)or the WAM of EGB supply were to fall further in 2019(we do not expect a material decline in 2019).Market view FOCUS|EUROZONE 18 January 2019 2019 EUR government bond supply and rating reviews KEY MESSAGES Gross supply:c.EUR880bn,nearly EUR+25bn vs 2018.Redemptions:c.EUR670bn,EUR+40bn vs 2018.Net supply:c.EUR210bn,EUR-15bn vs 2018.ECB balance sheet expansion:Nil,EUR-180bn vs 2018.ECB EGB reinvestments:c.EUR130bn in Germany,France,Italy and Spain,double that of 2018.Gross supply less QE,including reinvestment:c.EUR750bn,EUR140bn higher than 2018.Net supply less QE,excluding reinvestment:c.EUR210bn,EUR170bn higher than 2018.With most eurozone official funding targets now announced,we release our final eurozone government bond supply estimates for 2019.We expect 2019 EGB supply to increase by nearly EUR25bn versus 2018.In EUR terms,we expect the biggest rises in Germany and Italy.While ECB ended quantitative easing in December,PSPP reinvestment flows will accelerate this year.In 2019,we expect a EUR140bn rise in total government bond issuance less total central bank purchases and a EUR170bn rise in government deficits,less central bank balance sheet expansion.Please refer to important information and MAR disclosures at the end of this report G10 INTEREST RATES Agne Stengeryte,Europe Rates Strategist|BNP Paribas London Branch Fig.1:2019 supply forecasts and comparison versus 2018 Sources:National Treasuries,BNP Paribas.Given that G4 amounted to 78%of old capital key,a simple extrapolation would mean some EUR160bn of reinvestments in 2019.2019 Forecasts 2018 vs 2019 Gross&Net Supply(EURbn)Redemptions(EURbn)Gross Supply(EURbn)Net Supply(EURbn)Total QE buying(EURbn)Gross supply-total QE buying(EURbn)Gross Supply(EURbn change)Total QE buying(EURbn change)Gross supply-total QE buying(EURbn change)Germany 148 164 16 42 122 20-24 43 France 133 225 92 30 195 0-23 22 Italy 195 255 60 35 220 19-16 34 Spain 92 127 35 19 108-6-14 7 Belgium 22 28 6 28-6-10 4 Netherlands 30 21-9 21-3-10 7 Austria 26 20-6 20 4-5 10 Finland 5 9 4 9-1-5 4 Ireland 13 16 3 16-2-6 5 Portugal 9 15 7 15-1-5 4 Total 672 880 208 126 754 23-118 141*For France all figures are including buybacks,assumed c.EUR30bn in 2018 and EUR25bn in 019.|FOCUS 17/01/2019 2 2019 EUR government bond supply forecasts G10 INTEREST RATES Fig.2:2019 supply forecasts and comparison versus 2018 excluding QE flows Sources:National treasuries,BNP Paribas.*For France all figures are including estimated buybacks Agne Stengeryte,Europe Rates Strategist|BNP Paribas London Branch We expect 2019 EGB supply to increase by EUR25bn versus 2018.In EUR terms,we expect the biggest rise in Germany and Italy.Unless otherwise indicated,as a preliminary forecast our estimates use BNP Paribas economists and the European Commissions autumn 2018 forecasts for budget balances and GDP deflators,tailoring the numbers to other factors where appropriate.We will adjust these if necessary.Gross&Net Supply(EURbn)Redemptions(EURbn)Gross Supply(EURbn)Net Supply(EURbn)Gross Supply (%change)Net Supply(EUR change)RedemptionsGross Supply(EURbn)Net Supply(EURbn)Germany1481641613.5%32160145-16France13322592-0.2%-17116225109Italy195255607.9%518123655Spain9212735-4.8%-217713356Belgium22286-17.6%-7213413Netherlands3021-9-11.4%63824-14Austria2620-629.1%-21915-4Finland594-10.0%-15105Ireland13163-8.6%-69189Portugal9157-8.3%-371710Total6728802082.7%-16633857224*For France all figures are including buybacks,assumed c.EUR30bn in 2018 and EUR25bn in 2019.2018 Realized2018 vs 20192019 ForecastsSlightly higher 2019 gross supply:Gross supply:c.EUR880bn.C.EUR+25bn vs 2018.Redemptions:c.EUR670bn.EUR+40bn vs 2018.Net supply:c.EUR210bn,EUR-15bn vs 2018.Individual countries will see more substantial changes,with noticeably more supply in Germany and Italy.QE purchases to collapse to nil in 2019,but QE reinvestments to rise sharply.ECB EGB purchases excluding reinvestments:Nil,a huge estimated EUR180bn fall versus 2018.ECB PSPP EGB reinvestments:EUR130bn in Germany,France,Italy and Spain;twice that in 2018.Total QE buying significantly lower than in 2019:ECB EGB purchases including reinvestments:EUR130bn(ie EGB reinvestments only),EUR120bn less than 2018.Issuance less PSPP purchases to rise y/y.Total government bonds issued less total central bank purchases(gross supply less QE,including reinvestment):c.EUR760bn,EUR+140bn vs 2018.Government deficits less CB balance sheet expansion(net supply less QE,excl.reinvestment):c.EUR210bn,EUR+170bn vs 2018.The ECB has repeatedly argued that the stock of central bank balance sheets is more important to yield levels than the flow of QE,meaning total government bonds issued less total central bank purchases should matter more than government deficits less central bank balance sheet expansion.Still,the upcoming increase in the former will be large.Hence,we see 2019 supply as a headwind for bond markets.Detailed 2019 gross supply review Germany:The government intends to issue EUR156bn nominal and EUR6-10bn inflation-linked bonds in 2019,with the issuance plan for the first time including the partial refinancing of the EUR debt of the governments winding-up institution FMS Wertmanagement.France:Following budget adjustments in December,the funding requirement for 2019 will include the medium-and long-term government debt issuance programme net of buybacks worth EUR200bn,a EUR5bn increase versus 2018.As is typical,we assume EUR25bn of buybacks.Italy:We use our economists assumption for budget deficit to estimate gross supply,but see risks to the upside.For now,we pencil in EUR255bn.Spain:According to its 2019 funding strategy,Spain plans to auction EUR126.9bn of medium-and long-term debt in 2019 vs EUR131.9bn in 2018.According to the treasury,in 2019 the average life of debt outstanding will not be increased at the same rate as in previous years,but the average cost of debt outstanding should continue to fall,despite the anticipated increase in interest rates.Belgium:The Belgian Debt Agency plans to issue EUR28bn of Olos,a reduction by EUR6bn versus 2018.The Netherlands:The DSTA has committed to issuing EUR19-23bn of DSLs in 2019.Austria:According to Austrias funding outlook,RAGB issuance will amount to EUR18-21bn in 2019,broadly unchanged versus the EUR17-20bn guidance for 2018.Finland:According to the central government budget economys borrowing requirement for 2019,Finland Treasury intends to issue EUR9bn of RFGBs in 2019.Ireland:The National Treasury Management Agency(NTMA)plans to issue EUR14-18bn of IRISH over 2019.Portugal:According to its Financing Programme for 2019,EUR15.4bn is to be met through gross issuance of OT combining syndicated operations with auctions,through monthly issuance.|FOCUS 17/01/2019 3 Monthly breakdown of supply Agne Stengeryte,Europe Rates Strategist|BNP Paribas London Branch Figure 3 shows the estimated monthly breakdown of gross supply and Figure 4 shows redemptions in 2019 versus 2018.Figure 5 shows the estimated breakdown of net supply by country versus 2018.For the monthly supply patterns in 2019,we use the 2018 supply pattern and adjust based on announced supply schedules for 2019 where appropriate.Fig.3:Monthly breakdown of expected 2019 EGB gross supply per country Sources:National Treasuries,BNP Paribas.Monthly path as in 2018 and adjusted based on announced supply schedules for 2019 where appropriate.Fig.4:Monthly breakdown of expected 2019 EGB redemptions per country Sources:National Treasuries,BNP Paribas.Monthly path as in 2018 and adjusted based on announced supply schedules for 2019 where appropriate.Fig.5:Monthly breakdown of expected 2019 EGB net supply per country Sources:National Treasuries,BNP Paribas.Monthly path as in 2018 and adjusted based on announced supply schedules for 2019 where appropriate.G10 INTEREST RATES Redemptions 2019(EURbn)Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total 2019 Total 2018 Germany 24 16 13 16 13 24 13 16 13 148 160 France 8 29 16 12 42 22 129 116 Italy 23 24 11 28 15 41 27 12 15 195 181 Spain 18 22 21 21 10 92 77 Belgium 10 12 22 21 Netherlands 15 1 14 30 38 Austria 11 7 7 26 19 Finland 5 5 5 Ireland 7 6 13 9 Portugal 8 8 7 Total 2019 57 48 58 78 43 36 76 15 65 118 44 28 668 Total 2018 79 53 33 100 35 48 64 24 29 93 30 45 633 Net supply 2019(EURbn)Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total 2019 Total 2018 Germany-6-2 0-4 16-3-7 14 1 0 13-6 16-16 France 22 13 23-11 6 27 9 8 20-22-3 4 96 109 Italy 39 1 4 15-1 18 20-4-22-6 7-12 60 55 Spain 1 15 10-14 9 16-11 5 13-12-2 3 35 56 Belgium 6 5-7 0 3 3 3 0-9 0 3 0 6 13 Netherlands-13-1 5 2 2 2-12 0 3 3 1 0-9-14 Austria 7 2-10 2 2-6 2 0 2-6 0 0-6-4 Finland 0 3 0 1 0 1-5 3 0 1 1 0 4 5 Ireland 4 0 0 4 1-7 1 0 1-3 1 0 2 9 Portugal 4 1 1 4 1-8 1 0 1 1 1 0 7 10 Total 2019 64 37 26-3 39 43 1 25 11-44 23-11 211 Total 2018 36 32 53-21 39 32 8 15 45-24 36-29 224 Gross supply 2019(EURbn)Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total 2019 Total 2018 Germany 18 14 13 12 16 10 17 14 14 16 13 7 164 145 France 22 22 23 18 22 27 20 8 20 20 19 4 225 225 Italy 39 24 28 25 27 18 20 10 19 21 20 3 255 236 Spain 20 15 10 9 9 16 10 5 13 9 8 3 127 133 Belgium 6 5 3 0 3 3 3 0 3 0 3 0 28 34 Netherlands 2 0 5 2 2 2 2 0 3 3 1 0 21 24 Austria 7 2 2 2 2 2 2 0 2 2 0 0 20 15 Finland 0 3 0 1 0 1 0 3 0 1 1 0 9 10 Ireland 4 0 0 4 1 0 1 0 1 3 1 0 16 18 Portugal 4 1 1 4 1 1 1 0 1 1 1 0 15 17 Total 2019 121 85 84 76 82 79 76 40 76 74 67 18 879 Total 2018 115 85 86 79 74 80 72 39 74 69 66 16 857|FOCUS 17/01/2019 4 Farewell,ECB QE:QE ended in December,but PSPP reinvestment flows will accelerate this year.Gross PSPP flows to slow:According to the final data,the net PSPP was relatively higher in December than in October(EUR13bn vs EUR10bn).We expect gross PSPP,ie PSPP purchases including reinvestments(taking monthly redemption numbers and assuming full reinvestment)to have risen in December and then to decline in the months ahead(Figure 6).Reinvestment policy:According to the latest ECB data,in 2019 PSPP redemptions will be EUR167bn,ie 83%of total APP redemptions.According to the guidelines for 2019 reinvestments,published after the December monetary policy meeting,reinvestment of principal redemptions will be distributed over the year to allow a regular and balanced market presence(Figure 7).Also in the guidelines,the ECB ruled out cross-jurisdiction buying,specifying that reinvestments will be in the jurisdiction of the initial purchase.However,it kept a good degree of flexibility in reinvestments by allowing“temporary deviations in the overall size and composition of the APP due to operational reasons”.This was likely dictated by the need for smooth execution,given the scarcity in some jurisdictions.At the same time,the central bank suggested it will gradually adjust the stock of purchases to the new capital keys,while reiterating the market neutrality principle,implying a large-scale operation twist is unfeasible.According to the new capital key,Italy and Spain cumulative net PSPP purchases are too high by 1.44%and 1.15%,respectively,whereas Germanys 0.34%too low,as of December 2018.With Italy,Spain and Germanys respective deviations versus the current capital key at+0.81%,+0.50%and+0.39%as of end-December,we expect the introduction of the new capital key on the whole stock to exacerbate deviations by EUR12-14bn in those countries(Table 1).Importantly,however,no time frame has been set for this readjustment,highlighting that any adjustment to the portfolio allocation across jurisdictions will be gradual and calibrated as appropriate,to safeguard orderly market conditions.We do not therefore expect a noticeable market impact from the adjustment to the new capital key.ECB QE reinvestment outlook for 2019 Agne Stengeryte,Europe Rates Strategist|BNP Paribas London Branch On page 7 is the monthly breakdown of 2019 preliminary EGB gross supply and EGB gross supply less gross QE per country (in terms of gross QE in 2019,we subtract 1/12 of the estimated annual G4 EGB redemption each month)and 2019 eurozone rating review dates.G10 INTEREST RATES Fig.6:Estimated gross and net PSPP in 2018 and 2019 Fig.7:Expected monthly redemptions of the APP in 2019 Sources:BNP Paribas,ECB.Sources:BNP Paribas,ECB.Table 1:Current versus new capital key Sources:BNP Paribas,ECB.5101520253035404550EURbnEst.gross PSPPE PSPPForecastABSPP CBPP3 CSPP PSPP Jan-19 994 2,792 834 21,029 Feb-19 651 2,388 120 8,783 Mar-19 637 1,777 529 10,894 Apr-19 528 1,212 447 21,111 May-19 386 908 273 15,319 Jun-19 897 2,907 205 7,138 Jul-19 492 2,307 938 17,489 Aug-19 382 452 -4,542 Sep-19 538 3,239 1,097 10,381 Oct-19 461 1,590 592 29,024 Nov-19 883 1,715 769 13,134 Dec-19 487 647 186 8,668 Cumulative Monthly Net Purchases(EUR bn)Remaining WAM(years)Implied Share(%)Current Capital Key(%)Updated Capital Key(%)Change(%)Difference Current Capital Key(%)Difference Updated Capital Key(%)Difference Current Capital Key(EURbn)Difference Updated Capital Key(EURbn)Change(EURbn)Germany518.606.3026.71%26.33%27.05%0.73%0.39%-0.34%-7.56.614.1Spain260.808.3013.44%12.93%12.28%-0.65%0.50%1.15%-9.7-22.3-12.6France420.307.3021.65%20.74%20.93%0.18%0.91%0.72%-17.6-14.13.6Italy365.407.5018.82%18.01%17.38%-0.62%0.81%1.44%-15.8-27.9-12.1PSPP as of 31/12/2018(ECB data)|FOCUS 17/01/2019 5 G4 supply WAM peaked in 2016:With the decline in long term rates due to deposit rate cuts and the ECB QE,eurozone Treasuries were inclined to lengthen their supply weighted average maturity(WAM).In G4,the average WAM peaked at 10.2 years in 2016,mostly driven by a reversal of the WAM in Italy from 10.2 years in 2016 to 8.6 years in 2017(Fig.8).In core(Germany,Austria,the Netherlands and Finland),WAM spiked in 2017 due to Austria;semi-core(France,Ireland and Belgium)peaked in 2015 and retreated only slightly since;in peripherals(Italy,Spain and Portugal)WAM remains broadly in line with 2015-2016 levels (see Fig.13 and Fig.14).In DV01 terms,EGB supply has steadied recently:The product of YTM(years to maturity)and the amount issued(AMT),a proxy of DV01,shows Germany as steady since 2011,increasing throughout in Spain and retreating somewhat in 2018 in Italy and France(Fig.9).Put differently,semi-core and periphery proxy DV01 rose sharply since 2011,retreating somewhat in recent years,whereas core peaked in 2017 and 2018 should prove the lowest since 2011(Fig.15 and 16).Looking ahead,we estimate 2019 proxy DV01 using our EGB supply forecasts and unchanged WAM from 2018.DV01 impact of QE is set to diminish f