EGBS: Bund Futures Look Through Heavy Morning Of Econ Data
Jul-30 09:27
Despite an extremely heavy morning of regional economic data, Bund futures have traded in a contained 33 tick range, currently unchanged at 129.66. Early rallies were limited by this morning’s heavy Italian supply, which has now passed. Broader macro focus remains on today’s US refunding announcement at 1330BST and the FOMC decision this evening.
- Initial resistance in Bunds is the 20-day EMA at 129.92, while key support and the bear trigger is not seen till 128.84. In the short-term, risks to Bunds may be tilted to the upside due to growth concerns stemming from the EU-US trade agreement, alongside potential front-running of supportive month-end extensions.
- German yields are up to 2bps lower, with the 10-year tenor outperforming. 10-year EGB spreads to Bunds are little changed.
- Eurozone GDP printed 0.1% Q/Q in Q2, slightly stronger than consensus of 0.0% and slightly softer than the ECB's 0.2% staff projection. It was below Q1's outsized 0.6%. July EC economic confidence was also stronger-than-expected at 95.8 (vs 94.5 cons, 94.2 prior).
- Meanwhile, Spanish flash July inflation was a tenth above consensus at 2.7% Y/Y (vs 2.6% cons, 2.3% prior).
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
EQUITIES: Estoxx rolling Put
Jun-30 09:27
- SX5E (15th Aug vs 19th Sep) 5300p, bought the Sep for 34 in 2.5k.
Option Flows across multi assets, Bonds, Rates, Equity and FX have been very light so far Today.
SWAPS: German Spreads Little Changed To Wider
Jun-30 09:09
German ASWs and swap spreads are little changed to a touch wider on the day, with the previously detailed bid in core global bond markets providing support.
- 10-Year swap spreads have ticked away from June highs in recent sessions, while 30-Year spreads continue to trade close to year-to-date highs.
- Geopolitical and macro headline risk will have factored into the widening seen through early June.
- Questions surrounding Germany’s ability to deploy its newfound fiscal headroom in economically viable projects is probably an additional factor behind the 30-Year spread widening that has been in play since early May, with pre-existing short positioning playing a part as well.
- As we have noted previously, the issuance outlook continues to point to a fresh move lower in spreads over the medium-term, but there are risks to that view.
- Goldman Sachs look for a medium-term move lower in swap spreads, noting that their estimates suggest that the “free-float of German debt is poised to increase by 14ppt as a share of outstanding, or 12ppt as a share of GDP by end-2027”.
- They highlight SAFE issuance as another headwind for spreads.
- Goldman don’t see major spread support from any reallocation to Bunds out of U.S. Tsys, nor on spillover stemming from any deregulation in the U.S.
- Their work points to “9bp and 11bp of cheapening in 2- and 10-Year German spreads respectively by end-2027”, although they caution that spreads screen cheap vs. more immediate fair value drivers.
MNI: ITALY JUNE HICP 1.7% Y/Y (1.8% FCAST, 1.7% PRIOR)
Jun-30 09:02
- MNI: ITALY JUNE HICP 1.7% Y/Y (1.8% FCAST, 1.7% PRIOR)
