EGBS: Bund Futures Tracking USTs Higher; Eurozone Q2 GDP Confirms Flash
Bund futures have followed USTs higher through the morning, currently +17 ticks at 130.00. Bunds have struggled to consolidate above the 50-day EMA during August, which has cancelled any bullish theme that followed the formation of a bullish engulfing candle on Jul 28. Firm resistance is seen at the August 5 high of 130.60.
- US Treasury price action has been supported by more dovish signals from Fed officials in recent days, even as SF Fed President Daly pushed back against the idea of a 50bp September cut in a WSJ interview this morning.
- We note that the recovery in EGBs from Tuesday's low may have also been aided by this week's net supply flows, which are strongly negative.
- German yields are 1-2bps lower, with the curve bull flattening.
- 10-year EGB spreads to Bunds are little changed from yesterday’s close. The BTP/Bund spread remains below the 80bp handle, which has been assisted by a persistent pullback in EUR rates vol since mid-April.
- Details of tomorrow’s Trump-Putin meeting have crossed, but have not been impactful for markets.
- The second estimate of Eurozone Q2 GDP confirmed flash estimates at 0.1% Q/Q, with quarterly employment also growing at that clip. Meanwhile, June industrial production was weaker-than-expected, with May also seeing downward revisions.
- Broader macro focus turns to today’s US data calendar, which includes weekly jobless claims data and July PPI.
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GERMAN AUCTION RESULTS: 1.90% Sep-27 Schatz
| 1.90% Sep-27 Schatz* | Previous | |
| ISIN | DE000BU22106 | DE000BU22098 |
| Total sold | E5bln | E4bln |
| Allotted | E3.899bln | E3.066bln |
| Avg yield | 1.87% | 1.85% |
| Bid-to-offer | 1.81x | 2.24x |
| Bid-to-cover | 2.33x | 2.92x |
| Avg Price | 100.064 | 99.712 |
| Low Price | 100.060 | 99.710 |
| Pre-auction mid | 99.705 | |
| Previous date | 24-Jun-25 |
EGBS: German Curve Bull Flattens; French Budget Eyed This Afternoon
Bund futures are up 45 ticks today at 129.63, but remain below initial resistance at 130.06 (20-day EMA). That keeps a bearish theme intact, with support to monitor at 129.08 (July 14 low). Market moving headline flow has been relatively light, with no obvious trigger for today’s strength in major EGB futures.
- The German curve has bear flattened, with 30-year yields down 4.5bps at 3.197%. A reminder that 30-year yields met resistance at the April 2023 high of 3.263% yesterday.
- Germany will sell E5bln of the new 1.90% Sep-27 Schatz at 1030BST today.
- At 1500BST/1600CET, French PM Bayrou is set to unveil the main proposals of the 2026 state budget, including spending cuts and tax hikes that risk collapsing his minority government. French political risks gradually been priced back into OATs in recent weeks, particularly when assessing French debt against semi-core/periphery peers.
- 10-year EGB spreads to Bunds are within 0.5bps of yesterday’s closing levels.
- Eurozone industrial production was much stronger-than-expected in May, with volatile Irish data once again a likely culprit. On a monthly SA basis, production rose 1.7% M/M, above the 1.0% consensus and April’s -2.2% (revised up from -2.4% initial).
- Meanwhile, the German July ZEW survey was also stronger-than-expected.
- Global macro focus remains on today’s US CPI report.
COMMODITIES: Gold Holds Well Above 50-dma
A bull cycle in Gold that started Jun 30, remains intact and the yellow metal is holding on to its recent gains. Note that medium-term trend conditions are bullish - moving average studies are in a bull-mode position highlighting a dominant uptrend. WTI futures maintain a bearish tone following the reversal from the Jun 23 high, and recent gains still appear corrective. Support to watch is the 50-day EMA, at $65.46. The average has been pierced, a clear break of it would signal scope for a deeper retracement.
- WTI Crude down $0.21 or -0.31% at $66.73
- Natural Gas down $0.04 or -1.04% at $3.431
- Gold spot up $17.43 or +0.52% at $3361.14
- Copper up $0.05 or +0.01% at $555.2
- Silver up $0.12 or +0.32% at $38.2789
- Platinum up $7.89 or +0.58% at $1378.02
