EGBS: Bunds Trading More Steadily After Early Volatility; 15-year Auction Weak
Sep-10 09:43
- Bund futures are +15 ticks at 129.18, trading more steadily after a spree of volatile price action around the European cash open. Headline flow has been dominated by reactions to Poland’s downing of Russian drones in its territory overnight. This may be driving some light haven flows into core EGBs.
- The Sep 8 high of 129.33 was pierced in Bunds this morning, exposing the Aug 5 high at 129.50 as the next resistance to watch.
- Note that European equities traded quite resiliently until about 0900BST, but Estoxx 50 futures have fully erased gains in the 90 minutes since.
- German yields are +0.5bps to -0.5bps across the curve, with the 10-year tenor outperforming. The initial downside target for 10-year yields will be the 2.60% handle, which was last tested in early August.
- 10-year EGB spreads to Bunds are biased up to 1.2bps wider, with OATs and GGBs underperforming. Markets are digesting President Macron's appointment of former defence minister Sebastien Lecornu to the PM post. Initial reactions from opposition parties suggest Lecornu will face many of the same challenges as his predecessors in passing a budget.
- In supply, Germany and Portugal have held conventional auctions while Luxembourg is launching a new 10-year LGB via syndication. The 4.75% Jul-40 Bund auction results were weak.
- Spanish industrial production data was a little weaker than expected (-0.5% M/M vs -0.2% cons, 1.0% prior) while Italy was stronger than forecast (0.4% M/M vs 0.1% cons, 0.2% prior).
- Global focus turns today’s US PPI report at 1330BST, before the ECB decision and US CPI cross tomorrow.
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EQUITIES: Off Highs, Russia-Ukraine Matters Dominate
Aug-11 09:42
Equity swings have seemingly been driven by sentiment surrounding a potential Russia-Ukraine ceasefire, with optimism ahead of the upcoming Trump-Putin meeting quickly fading given the ongoing differences between Ukrainian and Russian pre-requisites.
- Technicals remain bullish across the major U.S. & European benchmarks.
- Euro Stoxx 50 futures topped out at 5,387.00, well ahead of initial resistance at the July 28 high (5,449.00) but the contract is above the 50-day EMA.
- S&P 500 e-minis rallied to 6,429.50 in Asia, before fading as London came online. The July 31 high and bull trigger (6,468.50) presents the initial upside target of note.
GERMAN T-BILL AUCTION RESULTS: 11-Month Bubill
Aug-11 09:33
| Type | 11-month Bubill |
| Maturity | Jul 15, 2026 |
| Allotted | E1.31bln |
| Previous | E0.9837bln |
| Total sold | E1.5bln |
| Target | E1.5bln |
| Avg yield | 1.891% |
| Previous | 1.758% |
| Bid-to-cover | 4.31x |
| Previous | 2.64x |
| Bid-to-offer | 3.77x |
| Previous | 2.6x |
| Previous date | Jul 07, 2025 |
FOREX: Rally in EUR/NOK Capped by CPI, Schedule Quiet
Aug-11 09:31
- Early strength in EUR/USD has faded, with the pair now flat headed through to the NY crossover. Nonetheless, price remains within range of the new recovery high posted on Thursday. This keeps the recovery off the late July pullback low intact, working against the bearish backdrop that’s dominated the pullback from 1.1829. This week's schedule is light - leaving the USD the likely more active leg of the price this week.
- The rally in EUR/NOK may be capped by the Norwegian CPI print this morning, which saw Y/Y CPI surge to 3.3% vs. Exp. 3.0% - with underlying CPI also tilted higher. A corrective pullback in the price would first target 11.9326, the 23.6% retracement for the upleg off the late July high. NOK is now the strongest performing currency in G10.
- GBP is making further progress today: GBP/USD is through the Friday high and clear of 1.3450. This narrows the gap with the notable 50-dma at 1.3503 - clearance above which could signal a stronger upside reversal toward the cycle high printed at the beginning of July.
- Notably, jobs and wages data due tomorrow morning are the next hurdle here. MPC policymakers clearly remain concerned over perky wages and the feedthrough to prices: consensus looks for weekly earnings ex-bonus to hold at 5.0% this week - still considerably north of the pre-COVID norms.
- Focus today rests on speculation and expectations for the Trump-Putin meeting scheduled for later this week. Ahead of the meeting in Alaska, reports this weekend suggested that Moscow and Washington are working toward a deal to progress with a ceasefire in exchange for a freezing of territorial gains - an agreement that will likely receive heavy criticism among European leaders, and the Ukrainian President himself.
- There remain questions over whether Zelenskyy himself could attend the meeting in some capacity - but regardless of the outcomes this week, the meeting represents a significant thawing in tensions between Russia and the West.
