AUSSIE BONDS: Curve Twist Flattens, AOFM Trims issuance Tasks
The ACGB curve twist flattened on Friday, as the early ’23 flattening theme remained in play. The major cash ACGB benchmarks sit 2.5bp cheaper to 3.0bp richer, pivoting around 7s, while YM was -2.0 at the close and XM was +1.5. Ranges were relatively contained.
- MTN supply from CBA and a light downtick in U.S. Tsys seemed to provide pressure in early Sydney dealing, before Tsys stabilised, allowing ACGBs to move away from their lows.
- A subsequent, modest bid came as the AOFM noted that is has reduced its issuance task estimate for the current FY to ~A$85bn (of which A$45.6bn has been completed) from the ~A$95bn outlined alongside the October Budget, noting that “Treasury have advised the AOFM that the volume of funding required in 2022-23 is lower than estimated at the October Budget due to the timing of some cash transfers.” The long end benefitted more from news, but the AOFM revealing that a new December 2034 bond line is planned to be issued by syndication in the last quarter of 2022-23 (subject to market conditions) limited the bid a little there. Note that Treasury Bond tenders will resume in the week commencing 30 January 2023.
- Looking ahead to next week, domestic risk events of note include the monthly labour market, retail sales & CPI data. We will also get the monthly trade balance, housing finance and building approvals readings.
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EURGBP TECHS: Bear Threat Still Present
- RES 4: 0.8867 High Oct 12
- RES 3: 0.8829 High Nov 09 and the bull trigger
- RES 2: 0.8778 High Nov 16
- RES 1: 0.8667 50-day EMA
- PRICE: 0.8631 @ 06:26 GMT Dec 7
- SUP 1: 0.8547 Low Dec 1 and the bear trigger
- SUP 2: 0.8522 Low Aug 30
- SUP 3: 0.8471 Low Aug 28
- SUP 4: 0.8449 1.236 proj of the Oct 12 - 31 - Nov 9 price swing
EURGBP continues to trade above last week’s low. A bearish threat remains present and attention is on the Oct 31 low of 0.8560 that was pierced on Dec 1. A clear break would strengthen a bearish theme and open 0.8522, the Aug 30 low. Moving average studies have crossed, highlighting a potential bear mode set-up. A clear break of 0.8560 would reinforce a bearish theme. Key resistance is at 0.8829.
LOOK AHEAD: UK Timeline of Key Events (Times GMT)
| Date | Time | Period | Event |
| 08-Dec | 0001 | Nov | RICS House Price Balance |
| 09-Dec | 0930 | Nov | BoE/Ipsos Inflation Next 12 Months |
| 12-Dec | 0001 | Dec | Rightmove House Prices |
| 12-Dec | 0700 | Oct | UK Monthly GDP/Trade/Production/Services/Construction |
| 13-Dec | 0700 | Oct | Labour Market Survey |
| 14-Dec | 0700 | Nov | Inflation Report |
| 14-Dec | 0930 | Oct | Halifax House Price Index |
| 15-Dec | 1200 | ---- | Bank Of England Interest Rate Decision |
| 16-Dec | ---- | ---- | BOE Announce Q1 Active Gilt Sales Schedule |
| 16-Dec | 0001 | Dec | Gfk Monthly Consumer Confidence |
| 16-Dec | 0700 | Nov | Retail Sales |
| 16-Dec | 0930 | Dec | S&P Global Manufacturing/Services PMI (flash) |
| 19-Dec | 1100 | Dec | CBI Industrial Trends |
SCHATZ TECHS: (Z2) Still Looking For A Break Higher
- RES 4: 107.023 1.764 proj of the Nov 1 - 24 - 28 price swing
- RES 3: 107.000 Round number resistance
- RES 2: 106.920 1.50 proj of the Nov 1 - 24 - 28 price swing
- RES 1: 106.875 High Dec 2 and the bull trigger
- PRICE: 106.690 @ 06:05 GMT Dec 7
- SUP 1: 106.460 Low Dec 6
- SUP 2: 106.430 Low Nov 30
- SUP 3: 106.335 Low Nov 28 and key near-term support
- SUP 4: 106.310 Low NOv 11
Schatz futures remain above support at the Nov 28 low of 106.335. The short-term outlook remains bullish and attention is on 106.875, the Dec 2 high and a bull trigger. A break of this level would confirm a resumption of the uptrend and open the 107.00 handle. On the downside, key short-term support has been defined at the 106.335 level. Clearance of this chart point would suggest scope for a deeper pullback.
