BONDS: EGB/Gilt - Attention turns to the UK CPI tomorrow
- Another more steady session for EGBs and Bund, but still close to a 100 ticks range for Bund.
- Continued tightening in the peripheral spread against the German 10yr.
- Greece is still in the lead, and was tighter by another 15bps, now 11.4bps at the time of typing.
- To a lesser extend, Italy (4.6bps), Portugal (2.7bps), and Spain (2.6bps).
- Greek/Bund is now tightest since April, with next support target at 200.00 (psychological,) and 198.82bps (April low and lowest since February).
- Gilt has traded in line with Bund, as investors await the UK CPI print tomorrow morning.
- Gilt/Bund spread is just 0.3bp wider.
- Looking ahead, Fed Barkin and Mester are the remaining speakers.
- Gilt futures are 40 ticks at 110.87.- Bund futures are down -0.05 today at 143.41 with 10y Bund yields up 1.4bp at 1.759% and Schatz yields down -1.8bp at 1.121%.
- BTP futures are down -0.17 today at 119.08 with 10y yields down -3.9bp at 3.657% and 2y yields down -3.8bp at 1.581%.
- OAT futures are down -0.24 today at 134.08 with 10y yields up 0.9bp at 2.324% and 2y yields down -2.2bp at 0.930%.
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US TSYS: Risk Off or Forced Unwinds Run Course? Stock Rebound Late
No data Friday -- But StL Fed President did appear on Fox Business interview in the afternoon. Nothing particularly new from Bullard though he did add he does not see a recession occurring this or next year.
- Bullard said he would leave the "timing" of when to hike rates up to Powell, but sees 50bp hike as a "good plan for now" while "the more we can frontload" hikes, the "better off we'll be." Bullard said he sees economic growth accelerating in the second half of the year to appr 2.5-3.0%, while unemployment will continue to recede.
- Early focus on headline risk with buying/short cover support possibly tied to China/covid headlines (CHINA PORT CITY TIANJIN STARTS MASS TEST IN FIVE DISTRICTS, Bbg).
- Decent overall volumes tied to accelerating Jun/Sep Tsy futures rolling, 5s and 10s lead again w/ over 240k and 175k recorded after the bell.
- Investment-grade corporate credit risk had climbed to new 2Y highs after midday as equity indexes sell-off. Back to March 2021 levels SPX eminis now appr 20% off early Jan high (4778.0) at 3829.00 (-68.75) after breaching key support / bear trigger levels of 3855.00, May 12 low AND 3843.25, the Mar 25 2021 low (cont).
- Equities staged a robust rebound off lows in late equity trade, not headline driven, more program/technical while offers fade, SPX eminis nearly back to steady at 3897.75.
JGB TECHS: (M2) Correction Extends
- RES 3: 151.13 - High Mar 3
- RES 2: 150.44 - High Mar 14
- RES 1: 150.14 - High Apr 1
- PRICE: 149.80 @ 20:30 BST May 20
- SUP 1: 148.72 - Low Mar 29
- SUP 2: 148.79 - 3.0% Lower Bollinger Band
- SUP 3: 147.95 - 1.0% 10-dma envelope
The primary downtrend in JGBs remains intact although a corrective cycle is in play and the contract maintains a firmer short-term tone. Key resistance to watch is at 150.14, Apr 1 high. The breach, in March, of the 61.8% Fibonacci retracement of the 2015 - 2020 rally at 149.65 strengthened a bearish theme and opens 148.79/147.95, which marks both the 3.0% Lower Bollinger Band and the 1.0% 10-dma envelope. A break of 150.14 would alter the picture.
US STOCKS: Late Session Rebound
Equities staging a more robust rebound off lows last 20 minutes, not headline driven, more program/technical while offers fade. Current levels:
- - DJIA down 52.31 points (-0.17%) at 31197.76
- - S&P E-Mini Future down 9 points (-0.23%) at 3887.75
- - Nasdaq down 80.3 points (-0.7%) at 11306
