EGBS: Bund Futures Narrow Gap To 50-day EMA Resistance On Healthy Volumes
Nov-21 10:43
Core FI markets have been supported by a renewed pullback in global risk sentiment. Bund futures have moved away from session highs, but pierced resistance at the 50-day EMA (129.05) earlier, currently +36 ticks at 128.98. A clear break of this EMA would expose key resistance at 129.40 (Nov 13 high). Volumes have been healthy, with around 450k lots traded this morning.
- The Eurozone November flash composite PMI was broadly inline with consensus at 52.4 (vs 52.5 cons and prior), with a solid services reading offsetting a more subdued manufacturing print. Meanwhile, ECB Q3 negotiated wages were lower-than-expected at 1.9% (vs 2.45% consensus). However, it’s not our preferred metric of Eurozone wage growth.
- German yields are 3-4bps lower across the curve, with the belly outperforming. Zooming out, German 5s30s has steeped to a fresh multi-week high of 106.5bps this week, narrowing the gap to the year-to-date high of 111bps.
- The EUR swap curve has seen a more pronounced steepening, with pre-positioning ahead of the Dutch pension fund transition gaining traction into year-end.
- That leaves Buxl ASWs (vs 6-month Euribor) close to a YTD high of -27bps. The safe haven bid in Bunds has promoted light widening in ASWs intraday.
- EGB/Bund spreads are little changed on the day, despite the previously flagged deterioration in wider risk sentiment.
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US TSYS: Yesterday’s Rally Consolidated, 20Y Auction Leads Calendar
Oct-22 10:42
- Treasuries are marginally firmer overnight, with intraday gains earlier helped by softer than expected UK in what’s otherwise seen little moves of note.
- Today’s 20Y re-open highlights an otherwise thin docket after last month’s solid auction.
- Trump’s NATO meeting will also be watched later on, as will his comments more broadly throughout the day. He yesterday urged Senate Republicans to hold the line on the government shutdown – now the second longest in history – whilst also floating that the meeting with China’s Xi maybe won’t happen albeit having said he expects to make a good deal with Xi just beforehand.
- Cash yields are 0.6-1.0bp lower across the curve.
- TYZ5 trades unchanged at 113-24 in what has been a particularly narrow range of 113-21 to 113-25 under subdued cumulative volumes of 200k.
- The bull cycle remains intact, with resistance seen at 114-02 (Oct 17 high) before 114-10 (Apr 7 high continuation), whilst support is seen at 113-03+ (20-day EMA).
- Data: Weekly MBA mortgage applications (0700ET)
- Coupon issuance: US Tsy $13B 20Y Bond re-open - 91210UN6 (1300ET). Last month’s 20Y auction saw a small 0.2bp trade through along with more encouraging internals, with a bounce in bid-to-cover and indirect take-up along with the lowest dealer take since mid-2024.
- Bill issuance: US Tsy $69B 17W bill auction (1130ET)
- Politics: Trump in NATO meeting (1600ET)
PIPELINE: Corporate Bond Roundup: More Supra-Sovereigns on Tap
Oct-22 10:37
- Date $MM Issuer (Priced *, Launch #)
- 10/22 $1B Rep of Korea WNG 5Y +19a
- 10/22 $Benchmark Alberta 10Y SOFR+81
- 10/22 $Benchmark Pershing Square 7Y investor calls
- $10.8B Priced Tuesday
OUTLOOK: Price Signal Summary - Pullback In Gold Appears Corrective
Oct-22 10:34
- On the commodity front, a sharp pullback in Gold yesterday appears corrective - for now. Note that the trend is overbought and a deeper retracement would allow this condition to unwind. Support at the 20-day EMA, at $4031.4, has been pierced. A clear breach of the average would signal scope for a deeper retracement, potentially towards the 50-day EMA, at $3796.7. Key resistance and the bull trigger has been defined at $4381.5, the Oct 20 high.
- A bearish theme in WTI futures remains intact and the move down last week reinforces current conditions. Note that moving average studies are in a bear-mode position, highlighting a dominant downtrend. Sights are on $54.89 next, the May 5 low, where a break would open $54.10, the Apr 9 low and a key support. Initial firm resistance is seen at $61.76, the 50-day EMA. Short-term gains are considered corrective.
