BONDS: 10-year Gilt/Bund Spread Unable To Sustain A Move Below 180bps
Oct-24 09:32
The 10-year Gilt/Bund spread has been unable to sustain a move below the 180bp figure, with the stronger-than-expected UK October flash PMI placing modest upward pressure on Gilt yields over the past hour. A break of 180bps would expose the 2025 low at 177.5bps.
- The Gilt curve has twist flattened this morning, with 2- and 5-year yields up just over 1bp, 10-year yields up 0.5bps and 30-year yields down 0.5bps.
- Short-end weakness comes after today’s retail sales, inflation expectations and PMI reports were all hawkish on net. However, the majority of Wednesday’s CPI-inspired rally has held. Meanwhile, long-end yields are marginally lower amid reports the Chancellor is considering raising income tax at next month’s budget.
- The stronger-than-expected aggregate Eurozone flash PMIs (driven particularly by German services) have promoted a bear flattening in the German curve. 10-year Bund yields are up 3bps at typing, but have been unable to consolidate above resistance at ~2.62% (200-day EMA) for now.
- In futures, Bunds are -37 ticks at 129.60, while Gilts are -13 ticks at 93.42.
- 10-year EGB spreads to Bunds are up to 1bp wider, with OATs underperforming after the flash PMIs signalled continued weakness in the domestic growth outlook.
- Global focus turns to today’s US CPI report at 1330BST.
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GERMAN AUCTION RESULTS: 2.50% Nov-32 Bund
Sep-24 09:31
| 2.50% Nov-32 Bund | Previous | |
| ISIN | DE000BU27014 | |
| Total sold | E4bln | E4bln |
| Allotted | E3.045bln | E2.675bln |
| Avg yield | 2.52% | 2.46% |
| Bid-to-offer | 1.13x | 0.79x |
| Bid-to-cover | 1.48x | 1.19x |
| Avg Price | 99.86 | 100.26 |
| Low Price | 99.86 | 100.24 |
| Pre-auction mid | 99.838 | |
| Previous date | 27-Aug-25 |
FOREX: USDJPY Approaching Post-Fed Highs at 148.38
Sep-24 09:24
- The low yielders have been under pressure this morning, with USDJPY notably rising to within 10 pips of the post Fed highs at 148.38. Uncertainty regarding Japanese politics and the upcoming LDP leadership election may be playing its part here, while moving average studies continue to highlight a dominant uptrend for the pair. A resumption of gains would open 149.14, the Sep 3 high.
- Furthermore, the impressive grind higher for the likes of EURJPY and CHFJPY bolster the bearish yen theme. Fresh cycle highs for EURJPY today further consolidate the breach of 173.97 last week, keeping bullish conditions firmly intact. Sights are on 174.86 next, a Fibonacci projection, before the 2024 highs which reside at 175.43, a key medium-term resistance.
- US new home sales is the main data point later today, before Thursday’s US jobless claims data. It’s worth noting that Tokyo CPI is scheduled Friday.
FOREX: GBPUSD Hovers Above Trendline Support
Sep-24 09:22
- Over the course of the European morning, the US Dollar is trading with a supportive tone. Despite most major pairs remaining well within the post-Fed ranges, the likes of EUR and GBP have extended session declines to just shy of 0.4% in recent trade.
- For EURUSD, the solid amount of option expiries between 1.1750-1.1800 appear to have capped the overnight price action, with the pair slowly edging back below 1.1775 as we approach the NY crossover. Last week’s low at 1.1726 is the immediate point of reference on the downside, however, support to watch is at 1.1678. the 50-day EMA.
- GBPUSD has traded through the 50-day EMA, and this leaves support at 1.3458 exposed, a trendline drawn from the Aug 1 low. Clearance of this line would strengthen a bearish threat. Below here, key support resides at 1.3333, the Sep 3 low.
