EGBS: BONDS: EGBs-GILTS CASH CLOSE: Highest OAT/Bund Spread Since 2012
Today’s EGB focus came later in the session with a sharp widening in the 10-year OAT/Bund spread, rising 5bps to 86bps for its highest since 2012 according to Bloomberg.
- Much of the OAT underperformance started from ~15:30GMT, along with a notable pick up in OAT future volumes vs below average Bund future volumes.
- Earlier today, the EC approved France’s 2025 draft budgetary plan, as had been reported by Bloomberg last week. The EC did however note that “the risks to achieving the fiscal objectives for 2025 set out in the Draft Budgetary Plan are tilted to the downside, and mainly relate to the favourable macroeconomic assumptions underpinning the budgetary targets set in the Draft Budgetary Plan”.
- Further, some desks noted the potential impact of this story from Le Parisien "The government will fall": Macron expects Barnier to fall. On the sidelines of the decoration ceremony for Élisabeth Borne this Monday at the Élysée, the president made a few confidences. If in front of the camera, he has always refused to comment on the government's choices, in private, he predicts the censorship of the Prime Minister by Marine Le Pen."
- PM Barnier has since appeared on local TV, reiterating on TF1 at 8pm CET the aim to cut the budget deficit to about 5% GDP whilst seeing a financial market ‘storm’ if the budget isn’t passed per Bloomberg headlines from the appearance.
- The 10-year BTP/Bund spread also widened ~3.5bps in the afternoon to leave it 1.5bps wider on the day at 127.6bps for its highest since Nov 13.
- Gilts weren’t immune from the widening, with the 10-year spread to Bund widening 3.3bps to 216.4bps.
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US: Vice President Harris Rally In Texas Underway Shortly
Vice President Kamala Harris is shortly due to hold a high-profile rally in Huston, Texas, designed to drive turnout amongst women by linking former Presdient Donald Trump to restrictive abortion laws enacted by Texas since the Supreme Court decision to role back Roe vs Wade in 2022. LIVESTREAM Harris will be joined on stage by pop star Beyonce and country singer Willie Nelson.
- A senior Harris campaign official said in an interview: “Texas is the stage, and the audience is the battlegrounds. It definitely arrests people's attention in a way that is hard to do by just going back to another battleground at this point in the cycle. This is our strategic way to break through the news.”
- Politico notes: “The message they want folks to hear: (1) Abortion rights are on the ballot in November, (2) Texas’ abortion ban is a result of Trump’s court appointments and (3) if he returns to the White House, those restrictions are at risk of spreading to other states.”
- The Harris campaign is hoping the rally can drive turnout, especially among non-college-educated White women. If the strategy is successful, Democrats are also targeting a down-ballot effect that can boost Rep Colin Allred (D) in his bid to unseat Senator Ted Cruz (R-TX). Statewide races in Texas are always a heavy lift for Democrats but recent polling shows a tight race that may provide the only pathway for Democrats to retain control of the Senate.
AUSSIE 10-YEAR TECHS: (Z4) Through First Support
- RES 3: 96.975 - High Mar 14
- RES 2: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- PRICE: 95.570 @ 15:49 BST Oct 25
- SUP 1: 95.490 - Low Oct 23
- SUP 2: 95.430 - Low Apr 26 (cont)
- SUP 3: 94.722 - Low Jul 2
Aussie 10-yr futures remain weak on the back of stellar domestic jobs numbers, prompting prices to come under further pressure. This counters the recent bullish set-up. Prices fell through 95.850 Friday, narrowing the gap with the next key support at the Apr 26 low of 95.430. Any recovery and clear break higher would confirm a resumption of the uptrend and pave the way for an extension towards 96.207, a Fibonacci retracement.
AUDUSD TECHS: Bearish Structure
- RES 4: 0.6942 High Sep 30 and the bull trigger
- RES 3: 0.6852/6889 High Oct 4 / 3
- RES 2: 0.6762 High Oct 9
- RES 1: 0.6728 50-day EMA
- PRICE: 0.6639 @ 16:01 BST Oct 25
- SUP 1: 0.6622/14 Low Sep 11 and key support / Low Oct 23
- SUP 2: 0.6576 61.8% retracement of the Aug 5 - Sep 30 bull leg
- SUP 3: 0.6508 Low Aug 8
- SUP 4: 0.6490 76.4% retracement of the Aug 5 - Sep 30 bull leg
A bear cycle in AUDUSD remains intact and price is trading just above this week’s low. The recent breach of both the 20- and 50-day EMAs, exposed 0.6622, the Sep 11 low and a key support. This support has been pierced. A clear break of it would strengthen a bearish theme and open 0.6576, a Fibonacci retracement. Key resistance is at 0.6942, the Sep 30 high. Initial firm resistance to watch is 0.6728, the 50-day EMA.
