EU Oct 2026: an opportunity to buy

France sent a shockwave to markets after President E.Macron decided to dismiss the National assembly and called for new elections. We think disruptions in EGB and SSA pricing can offer opportunities for investors , especially on the EU curve, which benefits from multiple sources of credit (i.e. Member states). EU Oct 26 , on auction next Monday, currently trades cheap in the credit fly with Spain and Netherlands . On the first hand, Spain is benefitting from significant investor support, due to improving fundamentals and fiscal consolidation efforts . Not being included in the list of countries under Excessive Deficit Procedure on last June 19 th by the European Commission can be seen as a reward. On the other hand, AAA countries are benefitting from renewed risk aversion, putting increased pressure on sovereign spreads . Some of this spread widening is of course predicated on perceived risk credit from countries like France or Italy. But investors are also willing to pay a premium to hedge against or benefit from a Bund rally precisely convey this message and supports AAA sovereign curves. Resilience of Spain curve in the current situation might not remain intact, should international investors decide to underweight EGBs in their global allocation. At the same time, EU curve could still benefit compared to AAA issuers , like Netherlands, which have already richened since the start of a risk-off move. We recommend going long EU Oct 2026 ( EU000A3K4D82 ) against SPGB May 2026 ( ES0000012L29 ) and Nether Jul 2026 ( NL0011819040 ) , with a 11.3 bp pickup in the fly. We target a spread of 0 bp over a 3-month horizon. We stop at 18 bp.