EGBS: Bund Futures Narrowing Gap To Key Support
Jul-11 09:36
Bund futures are narrowing the gap to key support at 128.97 (May 14 low), currently down 30 ticks today at 129.15 on decent volumes. There hasn’t been a discernible headline trigger for today’s selloff in Bunds, but this week’s bias has clearly been tilted to the downside.
- In yield terms, desks will look to target the 2.75% level in the 10-year Bund (currently +2.6bps at 2.73%).
- The light data calendar has allowed markets to focus on medium-term German/EU fiscal impulses, with the German curve bear steepening. 10s30s is up 0.4bps today at 50bps, extending this week’s steepening to 4bps.
- Characteristically hawkish comments from ECB’s Schnabel will have kept the pressure on the EGB complex, but intraday curve steepening suggests this has not been the primary driver.
- 10-year EGB spreads to Bunds are biased slightly tighter, but still within 1bp of yesterday’s close. 3/7/15-year BTP supply was digested smoothly.
- French June final HICP inflation was revised a tenth higher on a rounded basis, but this was driven by energy and not a market mover.
- Overnight, US President Trump surprised markets with a 35% tariff on Canada and signalled that a letter to the EU will be coming today. With the President now seemingly eyeing blanket tariffs of 15-20%, it seems the previous 10% reciprocal levy will be a best-case scenario for the EU.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
GILTS: Weaker & Steeper Ahead Of Spending Review
Jun-11 09:36
Gilt futures have broken yesterday’s base, trading as low as 92.20.
- Bears look to close yesterday’s opening gap higher (92.00) after bulls forced their way through a cluster of resistance levels on Tuesday.
- The early weakness came as core global FI moved lower, which seemed to be based on a mix of global supply pressure (including a 10-Year gilt auction) and some optimism re: Sino-U.S. trade talks.
- 10-Year supply saw average demand metrics.
- Markets were unmoved by a Chinese statement that failed to reveal any meaningful trade commitments with the U.S.
- Yields 3-6bp higher, bear steepening after yesterday’s labour market data-driven bull steepening.
- 10-Year yields remain above long-term uptrend support drawn off the Dec ’21 lows (4.522% today).
- 30-Year yields closed below long-term uptrend support drawn off their own Dec ’21 lows yesterday (a redrawn support line to account for yesterday’s move comes in at 5.242% today).
- 2s10s nears 65bp, after failing to extend meaningfully below 60bp during breaks in recent sessions.
- 5s30s ~5bp off last week’s multi-week closing low, last ~123bp.
- SONIA futures flat to -3.0. BoE-dated OIS showing 47bp of cuts through year-end vs. closer to 50bp at yesterday’s close.
- Chancellor Reeves will present the spending review from ~12:30 London.
- The release will likely reaffirm the UK’s fiscal fragility (perhaps factoring into this morning’s weakness) and is laden with political risk.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Jun-25 | 4.206 | -0.7 |
Aug-25 | 4.022 | -19.1 |
Sep-25 | 3.965 | -24.7 |
Nov-25 | 3.815 | -39.8 |
Dec-25 | 3.743 | -47.0 |
Feb-26 | 3.640 | -57.2 |
Mar-26 | 3.616 | -59.7 |
PORTUGAL AUCTION RESULTS: OT Results
Jun-11 09:35
| 0.90% Oct-35 OT | 3.625% Jun-54 OT | |
| ISIN | PTOTENOE0034 | PTOTE3OE0025 |
| Amount | E677mln | E490mln |
| Previous | E522mln | E3bln |
| Avg yield | 3.003% | 3.785% |
| Previous | 3.632% | 3.678% |
| Bid-to-cover | 1.79x | 2.39x |
| Previous | 2.96x | |
| Avg Price | 81.550 | 97.220 |
| Pre-auction mid | 81.453 | 96.698 |
| Prev avg price | 73.670 | 99.043 |
| Prev mid-price | 73.245 | |
| Previous date | 13-Sep-23 | 22-May-24 |
EURIBOR OPTIONS: Longer Dated Put Ladder trades for more
Jun-11 09:35
ERM6 98.37/98.25/97.93 broken p ladder, bought for flat in 15.5k total.
