EURIBOR OPTIONS: Call Spread buyer

• EUR/USD: Jun02 $1.1250(E1.1bln), $1.1300-05(E1.8bln), $1.1345-50(E1.4bln)
• USD/JPY: May29 Y144.80-00($1.6bln); May30 Y143.00($3.3bln)
• USD/CAD: May29 C$1.4355-75($1.5bln); May30 C$1.4500($1.3bln)

• In the equity space, a bullish trend condition in S&P E-Minis remains intact and the latest pullback appears to have been a correction. Last Friday’s sell-off resulted in a print below the 20-day EMA, at 5794.26. A key support lies at 5728.00, the 50-day EMA. A clear break of this average is required to highlight a stronger reversal and signal scope for a deeper retracement. Sights are on the bull trigger at 5993.50, the May 20 high.
• The trend cycle in EUROSTOXX 50 futures remains bullish and the recent pullback appears corrective. Moving average studies are in a bull-mode position, highlighting a clear uptrend and recent gains maintain the sequence of higher highs and higher lows. Sights are on 5516.00, the Mar 3 high and the key bull trigger. Key support to watch lies at 5238.48, the 50-day EMA. Clearance of this average would signal a possible reversal.

German yields are 2-3bps higher, with the curve lightly steepening. Moves in long-end JGBs once again set the tone at the European open, following a soft 40-year auction overnight. Steepening flow in futures (Bund/Schatz block) will have also contributed to the EGB curve moves. 

• Long-end Bund supply was digested smoothly, and may have weighed a little on the space ahead of the 1030GMT bidding deadline, despite the small size.
• Bund futures are -20 at 130.75, with initial support at 130.46 (50-day EMA). Today's range has been just 30 ticks wide.
• The spread has been set for today’s 10-year Spanish syndication. MNI expects a E10-13bln size.
• 10-year EGB spreads to Bunds are up to 1bp wider, with European equity futures softening. The BTP/Bund spread remains just below the 100bp handle.
• 1-year ahead ECB expectations surprisingly rose to 3.1% Y/Y (vs 2.8% cons, 2.9% prior). However, longer-term expectations were steady, limiting the market reaction. French Q1 GDP confirmed flash estimates at 0.1% Q/Q.
• Regional focus remains on Friday’s flash inflation data from Spain, Germany and Italy.