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Sub-sovereigns

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First Canadian province to visit euros in 2026
◆ Cautious start after spreads moved around ◆ KfW's spread tightens, but Länder unmoved ◆ ‘Real’ Länder-KfW spread yet to be established
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German sovereign goes for conventional over green as smaller peers join a crowded Tuesday
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Primary market shows strength but pockets of weakness a reminder that ‘1bp could make all the difference’
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  • The States of Guernsey entered the bond market for the first time on Friday, having been tempted to bring a deal by ultra low Gilt yields.
  • Sterling investors worried about a drop in Gilt supply from the United Kingdom this financial year after Wednesday’s autumn statement received some good news on Thursday, as a new issuer mandated banks on Thursday for a debut bond.
  • A pair of German states jumped into the euro market at the start of the week, grabbing the opportunity to source cheap funding as speculation that the European Central Bank could start buying government bonds pushed Bund yields to record lows. But despite the luscious funding conditions, bankers are struggling to find supply.
  • Moody’s has downgraded the Government of Japan’s debt rating by one notch from Aa3 to A1 with a stable outlook. The assessment comes on the tailwinds of mounting concerns over Japan’s ability to reduce fiscal deficit and the effectiveness of Abenomics.
  • The Community of Aragon has become the second Spanish region to bring a deal to the capital markets since European Central Bank president Mario Draghi made dovish comments late last week. And with the Spanish sovereign’s yields hitting record lows this week, there could be more sub-sovereign action before the year is out.
  • A cost saving measure from the French government could mean that the French sub-sovereign debt market could be unrecognisable in a few years.