EGBS: Bunds Back To Unchanged Despite Ratchet Higher In Geopol Risk
Jun-13 09:39
- Despite a ratchet higher in geopolitical risk following Israel’s strikes on Iran, Bund futures have pulled back from overnight highs to trade little changed on the session at 131.32. Resistance at 131.85 (Apr 22 high) was pierced but has held, alongside the 2.43% support in the 10-year Bund yield (Apr 7 low).
- The German curve has lightly bear flattened, with Schatz yields up 1bp and 30-year Bund yields little changed.
- Today’s Euribor fixing spurred a burst of downside activity in the EUR front-end, which partly spilled over into Schatz futures.
- Weak risk sentiment sees BTP futures (-35 ticks at 121.17) underperform Bunds. In cash markets, the 10-year BTP/Bund spread has widened 3bps to 96bps, after tracking within a 90-92bp range through this week.
- Today’s regional data has not been market moving. Final May HICP prints from Germany, France and Spain confirm an unwind of Easter effects, while April EZ industrial production was weaker-than-expected (likely due to an unwind of Q1 Irish tariff front-running).
- Geopolitics remains the focus for the rest of the session, with only the US June UoM survey due at 1500BST.
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PORTUGAL AUCTION RESULTS: OT Results
May-14 09:37
| 1.65% Jul-32 OT | 4.10% Feb-45 OT | |
| ISIN | PTOTEYOE0031 | PTOTEBOE0020 |
| Amount | E548mln | E702mln |
| Previous | E485mln | E432mln |
| Avg yield | 2.72% | 3.75% |
| Previous | 3.38% | 3.30% |
| Bid-to-cover | 1.97x | 1.92x |
| Previous | 2.51x | 2.16x |
| Avg Price | 93.14 | 104.77 |
| Pre-auction mid | 93.035 | 104.332 |
| Prev avg price | 86.95 | 111.60 |
| Prev mid-price | 86.749 | 111.130 |
| Previous date | 13-Sep-23 | 13-Nov-24 |
GERMAN AUCTION RESULTS: 1.25% Aug-48 Bund / 2.50% Aug-54 Bund
May-14 09:35
| 1.25% Aug-48 Bund | 2.50% Aug-54 Bund | |
| ISIN | DE0001102432 | DE000BU2D004 |
| Total sold | E1.5bln | E1bln |
| Allotted | E1.313bln | E818mln |
| Previous | E806mln | E1.189bln |
| Avg yield | 3.09% | 3.12% |
| Previous | 2.89% | 2.70% |
| Bid-to-offer | 3.68x | 1.85x |
| Previous | 1.13x | 1.95x |
| Bid-to-cover | 4.20x | 2.27x |
| Previous | 1.40x | 2.46x |
| Avg Price | 69.86 | 88.21 |
| Low Price | 69.85 | 88.18 |
| Pre-auction mid | 69.810 | 88.127 |
| Prev avg price | 71.15 | 95.87 |
| Prev low price | 71.12 | 95.84 |
| Prev mid-price | 71.139 | 95.761 |
| Previous date | 11-Oct-23 | 12-Feb-25 |
GILTS: Support In Futures Pierced Before Recovery
May-14 09:32
Gilts have recovered from session lows, after being pressured by concession ahead of this morning’s 10-Year auction.
- Gilts based just ahead of the bidding deadline, with the auction generating solid demand metrics, despite the LAP printing comfortably below the pre-auction mids.
- Futures breached their April 15 low (91.43), basing at 91.39 before a recovery to 91.50.
- Yields effectively flat on the day across the curve.
- 2s continue to trade sub-4.00% after yesterday’s brief and limited break above.
- 10-Year yields have pierced the April 15 high (4.672%) during the past couple of sessions but haven’t meaningfully extended beyond that point.
- BoE-dated OIS little changed on the day, showing 47bp of cuts through year-end, with the next cut fully discounted through the end of the September MPC.
- SONIA futures little changed to 3.0 lower, terminal BoE pricing (proxied by SFIU6) sits at ~3.60%, 30bp above recent dovish extremes.
- Hawkish BoE dissenter Mann didn’t move markets as she outlined the reasoning behind her latest vote, while Deputy Governor Breeden didn’t touch on monetary policy.
- Macro and cross-market cues are eyed from here, with little of note on the UK calendar until tomorrow’s preliminary Q1 GDP data.
