EGBS: Bund Futures Move Away From Highs As Equities Stabilise
Oct-17 09:28
Bund futures have moved away from session highs amid a stabilisation in global equities, but remain +25 ticks at 130.25 on solid volumes. Global equity markets have been pressured since yesterday afternoon, initially spurred by renewed US regional bank concerns.
- A bull cycle in Bunds futures remains intact, with the intraday high of 130.59 providing resistance. Clearance of this level would expose key resistance at 130.80, the June 13 high.
- The German curve has bull steepened, with Schatz and Bobl yields down 3bps and 30-year yields down 1bp. That pushes the 5s30s curve back above 100bps (+1.8bps today). Although 5s30s has traded broadly sideways since the middle of September, a longer-term steepening trend remains intact.
- German ASWs are up to 1.3bps wider, with Bunds benefitting from risk-off driven haven demand.
- 10-year EGB spreads to Bunds are up to 2bps wider on the session, with high-beta BTPs unsurprisingly underperforming. Despite today's price action, spreads have still tightened on the week, led by France amid a reduction in near-term political uncertainty.
- Eurozone final September core HICP was revised up to 2.4% Y/Y on a rounded basis (vs 2.3% flash), but the unrounded figure was unchanged at 2.35%.
- ECB's Nagel and Rehn are scheduled to speak later today.
Figure 1: German 5s30s Year To Date
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FED FUNDS FUTURES: FFV5 Lifted
Sep-17 09:24
FFV5 paper paid 95.945 on ~10.6K
ITALY AUCTION RESULTS: Buyback results
Sep-17 09:20
MEF buys back E5bln of the following bonds:
- E1.025bln of the 3.50% Jan-26 BTP (ISIN: IT0005514473) at price 100.425
- E695mln of the 4.50% Mar-26 BTP (ISIN: IT0004644735) at price 101.076
- E845mln of the 0% Apr-26 BTP (ISIN: IT0005437147) at price 98.921
- E835mln of the 0.50% Apr-26 CCTeu (ISIN: IT0005428617) at price 100.336
- E1bln of the 1.60% Jun-26 BTP (ISIN: IT0005170839) at price 99.705
- E600mln of the 0% Aug-26 BTP (ISIN: IT0005454241) at price 98.317
FOREX: USD Index Stabilises Just Above Cycle Lows, BOC and Fed Awaited
Sep-17 09:19
- Ahead of the keenly awaited September Fed decision, the US dollar trades on a more stable footing, with the dollar index 0.11% higher on the session. However, more broadly the DXY is consolidating its steep losses this week and resides just 35 pips away from the year’s lows, printed on July 01.
- Moderate weakness for equities has prompted some further underperformance for the likes of AUD and NZD, although both are only down around 0.2% on the day at typing. No great surprises within the UK CPI data to alter BOE expectations has kept GBPUSD unchanged on the day.
- Cable trades in a narrow 29 pip range but continues to consolidate its firm break above 1.3595. With both the Fed and Bank of England over the next two sessions, traders will be keeping a close yee on whether topside momentum can continue for the pair. Immediate resistance at 1.3681, the July 4 high, has capped the advance so far. Above here, 1.3789 remains the key resistance for the pair, the July 1 high.
- Overall, EURUSD has also consolidated its impressive move higher to fresh cycle highs on Tuesday, oscillating either side of 1.1850 throughout the morning. Yesterday’s highs of 1.1878 will be the immediate level to watch as we approach the Fed, before more meaningful targets at 1.1923 and 1.2000.
- USDJPY had a significant low print overnight, matching a key support level to the pip at 146.21, the Aug 14 low and a bear trigger. A break of this level would highlight a stronger bearish threat and highlight a range breakout. While spot did subsequently bounce to 146.70, the pair is tracking back below 146.40 as we approach the NY crossover.
- Both the Bank of Canada and FOMC rate decisions highlight the economic calendar on Wednesday, with both expected to cut rates by 25bps. US building permits and housing starts data will cross, with New Zealand GDP kicking off Thursday’s APAC schedule.
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