BUNDS: Edging to session high post Cash Open

Swedish money market participant inflation expectations fell across time horizons in July. Most notably, 5-year ahead CPIF expectations fell two tenths to 1.8%. That looks like the lowest since July 2021. The survey was conducted between June 30 – July 6, so did not include the stronger-than-expected flash June inflation report. The Riksbank will likely need to see several 5-year prints below the 2% target to become concerned about a de-anchoring of inflation expectations, not just in the monthly money market participant survey but also the broader quarterly survey (which includes social partners’ expectations).

• 1-year ahead CPIF expectations fell a tenth to 1.9%. 1-year ahead GDP expectations rose a tenth to 1.8%.
• 2-year ahead CPIF expectations fell a tenth to 1.9%. 2-year ahead GDP expectations rose three tenths to 2.4%.
• 5-year ahead GDP expectations fell a tenth to 2.0%.

• RES 4: 122.71 2.764proj of the May 14 - 20 - 21 price swing
• RES 3: 122.35 2.500 proj of the May 14 - 20 - 21 price swing 
• RES 2: 122.00 Round number resistance
• RES 1: 120.60/121.73 20-day EMA / High Jun 13 and the bull trigger
• PRICE: 119.92 @ Close Jul 14
• SUP 1: 119.84 Low Jul 14        
• SUP 2: 119.48 Low May 26 
• SUP 3: 118.87 Low May 21  
• SUP 4: 118.51 Low May 14 and key support 

The trend condition in BTP futures is unchanged, it remains bullish. However, for now, a corrective cycle is in play and this has resulted in a breach of support at 120.09, the Jul 23 low. The break signals scope for a deeper retracement, potentially towards 118.87, the May 21 low. On the upside, key resistance and the bull trigger has been defined at 121.73, the Jun 13 high. Initial resistance to watch is 120.60, the 20-day EMA.

A narrow Asia-Pac range for Bund futures, with the contract sticking within yesterday’s boundaries, last +11 at 129.29.

• Bears remain in technical control, with initial support at yesterday’s low (129.08). Meanwhile, initial resistance is located at 20-day EMA (130.06).
• Both the German 2s10s and 5s30s curves are moving back towards year-to-date closing highs, with domestic and global factors being felt, despite already elevated steepener positioning.
• No reaction to the Asia-Pac rally in e-minis/Euro Stoxx futures, which was aided by news that Nvidia plans to resume some sales to China following assurances/an agreement with U.S. policymakers.
• Mixed Chinese GDP & monthly economic activity data also failed to have a meaningful impact.
• Notes that RTRS sources have suggested that “U.S. President Donald Trump's threatened 30% tariff on European Union imports is complicating the European Central Bank's decision-making but is unlikely to derail plans for a pause in rate cuts next week”.
• The German ZEW survey and final CPI data from Spain is due today, but the major macro input will come in the form of U.S. CPI.
• On the supply front, Germany will sell EUR5bln of the new 1.90% Sep-27 Schatz (ISIN: DE000BU22106).
• Also worth remembering that French PM Bayrou will outline his budget cutting plan later today, with related political risks well defined and ongoing.