EGBS: Core EGBs Supported As Further China Retaliation Weighs On Risk Sentiment
Apr-11 09:30
A further intensification of the US-China trade war has provided support to Bund futures this morning, but signs that further retaliatory tariff increases are unlikely from the Chinese side may have limited the rally. Heavy Italian supply (E9bln of 3/7/13-year BTPs) will have capped upside in the run-up to the 1000BST bidding deadline, but this channel should now fade after acceptable auction results.
- Bund futures are +30 ticks at 130.66, having tested yesterday’s high of 130.73. Wednesday’s range provides initial support and resistance levels (128.60 and 130.75 respectively). On the upside, clearance of Wednesday's high exposes 131.32, the 76.4% retracement of the Apr 7 - 9 pullback.
- The German curve has bull steepened, with Schatz ~5.5bps lower at 1.73%. 10-year yields are down 2bps on the session.
- 10-year peripheral spreads to Bunds once again display a strong correlation with global risk sentiment, with the 10-year BTP/Bund spread widening 4.5bps back to 129bps. The spread is currently up 10bps on the week, reflecting a ratchet higher in EUR 3m10y swaption vol.
- US PPI and UMich data headline today’s US macro calendar, but tariff headlines – in particular any response to China’s latest retaliation – are the primary focus.
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Historical bullets
FOREX: FX Exchange traded Roll pace
Mar-12 09:17
Expiry Next Monday the 17th.
- EUR: 36%.
- GBP: 33%.
- JPY: 45% (above pace).
- CHF: 32%.
- CAD: 33%.
- AUD: 42%.
- NZD: 44% (above pace).
- SEK: 54% (above pace).
- NOK: 47% (above pace).
EURIBOR OPTIONS: Put fly buyer
Mar-12 09:12
ERJ5 97.6875/97.62/97.5625p fly, bought for 0.75 in 10k.
BUNDS: /SWAPS: Modest Bid On Green's Reaffirming Fiscal Position Fades
Mar-12 09:05
A modest bid in German bonds on the back of Habeck reaffirming the known stance of the Greens when it comes to debt brake reform.
- While the Greens continue to voice their well-documented concerns surrounding defence spending, the door to fiscal negotiations and a deal in the immediate term seems to remain open.
- That explains the limited market reaction in German paper, with the major futures contracts already back from their knee-jerk highs.
- Long end ASWS vs. 3-month Euribor similarly muted, widening by ~0.5bp before fading.
