AFS Markets Blog: Midday 20/10/2026

• Meanwhile in markets, on a no-news Tuesday French bonds are back in the crosshairs, with the Bund spread – aka Le Spread – approaching the post-Eurozone crisis high of 159bps. At the same time, broader equity markets are dragged down by stiff losses for AI (exposed) stocks;

• For the record: Le Spread had risen to 152bps around noon. Clearly, OATs aren’t benefitting from the lull in French protests and riots (and no news on the budget front I should add). OAT yields are up 1-4bps across the curve for the day. At the same time, Bunds are completely ignoring the relentless increases in energy futures prices this morning. Benefitting from haven flows, Bund yields are down 3-4bps across the curve while US Treasury yields are basically motionless. EURCHF ticked down to 0.924 from 0.927 before retracing some of the declines;

• In energy space Brent crude futures are approaching the $112 a barrel handle while Dutch natgas futures are really, really close to the 90 euros per MWh handle. Mind you that energy futures prices are rising despite surprisingly little in the way of headlines, barring a few Iranian tanker strikes every now and then. Furthermore, the Trump administration – or at least President Trump – seems kind of bored with Iran these days. The world’s most successful dealmaker (ahem) seems to have set his sights instead on getting a truce in the Ukraine war;

• Turning to AI, in another textbook case of solid earnings and/or outlook greeted with a stiff sell-off, the Swiss company ABB, which manufacturers electrical equipment, robots, and whatnot, is down by about six percent today. According to a Bloomberg recap of analysts’ commentaries, strong order intake failed to meet lofty expectations for AI demand. As I just mentioned, we’ve seen this movie before. ASML and ABB rival Schneider Electric befell the same fate after their respective earnings releases earlier in the season. I am quite sure that I missed a few names;

• In the greater scheme of things, fifteen of the twenty stocks on our AI screener are either in correction territory or bear market territory. As a matter of fact, eleven names are in bear market territory. Leading the losers are – no surprise here for fixed income investors – Cloud compute provider CoreWeave and cloud company Oracle – with declines of more than 50% from their peaks;

• And speaking of CoreWeave and Oracle, stress in AI credit space is contained in these two names. Since issuance, their 5-year G-spreads have widened by 256bps and 136bps, respectively. Other AI bonds have also underperformed the broader credit market but absolutely not in a ‘stressy way’ like CoreWeave and Oracle;

• In our neck of the woods, Eurozone money markets, uptake at the ECB’s weekly MRO auction ticked up to 19.25 billion euros. Including the 3-month LTROs, bank borrowing from the Eurosystem is at the upper end of the recent 30-35 billion euros range (MROs+TLTROs). I also take due note of elevated 6-month Euribor settlements. Settlements have average 30bps over OIS this month. Clearly, banks prefer to pay up for LCR-friendly 6-month borrowings than turn to the ECB. As always with Euribors, disclaimers apply. We must wait for a few months before the Euribor transparency indicators are released. And find out if there’s real volume behind the elevated settlements;

• Looking ahead, keep an eye on Ukraine as Trump’s special envoy Witkoff will travel to Moscow to meet President Putin. At the same time, the Kremlin is still pushing for a trilateral divide-and-rule summit between Putin and President Trump and Chinese leader Xi.

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