EUROZONE ISSUANCE: EGB Supply

Spain and Finland have both announced syndication mandates while Germany and France are both still due to hold auctions this week and Portugal will hold a reverse auction. Already this week, the EFSF, France and Lithuania have held syndications, whilst Slovakia and Germany have held auctions. We look for estimated gross issuance for the week at E57.2bln, up from E42.2bln last week.

• On Tuesday, Finland announced a mandate to issue E3bn WNG of a new 20-year RFGB maturing 15 April 2045. This was fully expected by MNI this week and we had also pencilled in the E3bln WNG size. We expect the transaction to take place today.
• Also on Tuesday, Spain announced a mandate for a new 10-year Obli maturing on 30th April 2035. MNI fully expected this and we pencil in a E10-15bln transaction size to take place today.
• Today, Portugal will hold a reverse auction to buyback the 2.875% Oct-25 OT (ISIN: PTOTEKOE0011).
• Finally today, Germany will return to the market to hold a 15-year Bund auction, looking to sell E1.5bln of the 2.60% May-41 Bund (ISIN: DE000BU2F009) alongside E500mln of the 2.50% Jul-44 Bund (ISIN: DE0001135481).

For more details on issuance this week and next week see the full document here: EZ250122.pdf

• RES 4: 5298.50 1.500 proj of the Nov 21 - Dec 9 - 20 price swing
• RES 3: 5261.57 1.382 proj of the Nov 21 - Dec 9 - 20 price swing      
• RES 2: 5215.87 1.236 proj of the Nov 21 - Dec 9 - 20 price swing 
• RES 1: 5204.00 Intraday high          
• PRICE: 5195.00 @ 06:32 GMT Jan 22  
• SUP 1: 5113.00/5040.00 Low Jan 17 / High Dec 9         
• SUP 2: 5035.87/4931.00 20-day EMA / Low Jan 13    
• SUP 3: 4829.00 Low Dec 20 and key short-term support
• SUP 4: 4775.00 Low Nov 29 

A bull cycle in the Eurostoxx 50 futures contract remains intact and the contract is trading at its highs. Last week’s climb resulted in a breach of 5054.00, the Jan 8 high, to confirm a resumption of the uptrend. The focus is on a climb towards 5215.87, a Fibonacci projection point. Key short-term support has been defined at 4931.00, the Jan 13 low. Initial firm support lies at 5035.87, the 20-day EMA.

• UK markets are particularly sensitive to growing fiscal risks at present. This is likely to be the last release to be incorporated into the OBR's EFO forecasts (which will be published alongside the Chancellor's spring statement on 26 March).
• December is a month where self-assessment income tax receipts edge up, ahead of the January 31 payment deadline, as early tax submissions begin. The OBR forecasts SA tax receipts of GBP2.2bln in December (vs GBP0.6bln in November).
• Interest payments are likely to be higher than the OBR forecast (the OBR expected the Bank rate at 4.40% in Q1 and 3.84% by end of 2025).
• Currently, the fiscal year-to-date CGNCR (Central Government Net Cash Requirement) is running a cumulative GBP147.4bln between April and November 2024, after rising GBP16.3bln in November. It lies marginally below the updated OBR forecast of GBP148.2bln for Apr-Nov 2024 period. For the month of December, the OBR expect it to rise a further GBP19.4bln.
• PSNBex (public sector net borrowing ex public sector banks) is expected to be GBP14.6bln according to the OBR. Current PSNBex fiscal YTD is slightly above the OBR estimate at GBP113.2bln (OBR forecast GBP111.2bln).
• The Bloomberg consensus looks for PSNB inc public sector banks at GBP14.2bln (vs 11.2bln prior), with analyst estimates wide ranging between GBP13-15.5bln.
• Finally, the OBR forecast the current budget deficit to rise GBP 8.7bln in December (vs 6.8bln prior). Between April and November 2024 the deficit stands at GBP76.8bln, 0.3bln above the OBR forecast.