EUROZONE ISSUANCE: EGB Supply

• On Thursday, Spain will look to sell Bonos / Olbi / ObliEi with the amount on offer to be confirmed this afternoon. On offer will be the on-the-run 3-year 2.80% May-26 Bono (ISIN: ES0000012L29) that was launched in January’s auction, the off-the-run 1.40% Apr-28 Obli (ISIN: ES0000012B39) and the on-the-run 20-year 3.45% Jul-43 Obli (ISIN: ES0000012K95). Also on offer will be the 1.00% Nov-30 Obli-Ei (ISIN: ES00000127C8).
• Also Thursday, France will look to sell E10.0-11.5bln of LT / Green OATs. On offer will be the 9-year 0% Nov-31 OAT (ISIN: FR0014002WK3), the on-the-run 10-year 2.00% Nov-32 OAT (ISIN: FR001400BKZ3) and the 0.50% Jun-44 Green OAT (ISIN: FR0014002JM6).
• Belgium will conclude issuance for the week on Friday with the ORI Facility with details to be announced Thursday afternoon. ORI operations have historically seen off-the-run OLOs offered for up to E500mln (with generally two but sometimes one OLO on offer). However, the December ORI operation broke that convention by having a larger operation size of E750mln.
• Given this week’s calendar (ECB, Fed and BOE meetings) as well as the already fairly heavy supply at auction, our base case is that there will be no syndications next week.

NET NOMINAL FLOWS: This week sees two redemptions totalling E26.0bln: E21.7bln from a formerly 10-year Spanish Obli and E4.4bln of a formerly 5-year GGB. Coupons total E9.8bln of which E4.6bln are Austrian and E4.0bln are Italian. Despite gross nominal issuance being higher this week at an expected E42.5bln, we look much reduced positive net flows E6.7bln in the week ahead, down from last week’s positive E31.5bln of net issuance.

For more on the week ahead issuance picture see the MNI EGB Issuance, Redemption and CashFlow Matrix here.MNI EGB Issuance, Redemption and CashFlow Matrix here.

• RES 4: 144.00 Round number resistance
• RES 3: 143.16 61.8% retracement of the Dec 15 - Jan 3 bear leg
• RES 2: 142.86/94 High Jan 11 / High Dec 28 and key resistance
• RES 1: 142.30 High Jan 25
• PRICE: 140.76 @ 06:45 GMT Jan 30
• SUP 1: 140.47/137.92 Low Jan 23 / Low Jan 19
• SUP 2: 137.39 Low Jan 3 and the bear trigger
• SUP 3: 137.03 Low Aug 29
• SUP 4: 136.02 Low Aug 25

EURJPY is holding on to the bulk of its recent gains following the recovery from 137.92, the Jan 19 low. The 50-day EMA, at 141.74, has been pierced. A clear break of this average would strengthen a bullish condition and expose key resistance at 142.86, the Jan 11 high. For bears, a reversal lower would refocus attention on the bear trigger at 137.39, Jan 3 low. Clearance of this level would resume the downtrend that started in October last year.

The EU, Italy, Germany, Spain, France and Belgium are all due to come to the market this week. We look for gross nominal issuance at first round operations of E42.5bln for these deals, up from last week’s E32.0bln.

• Today, the EU will kick off issuance for the week with an auction of 5/10-year EU-bonds. On offer will be up to E2bln of the 2.00% Oct-27 EU-bond (ISIN: EU000A3K4DS6) and up to E2bln of the 1.00% Jul-32 EU-bond (ISIN: EU000A3K4DD8).
• Tomorrow, Italy will come to the market with the on-the-run 5/10-year BTPs and the on-the-run CCTeu on offer: E3.5-4.0bln of the 3.40% Apr-28 BTP (ISIN: IT0005521981), E3.0-3.5bln of the 4.4% May-33 BTP (ISIN: IT0005518128) and E1.0-1.5bln of the 0.50% Apr-26 CCTeu (ISIN: IT0005428617).
• Also tomorrow, Germany will conclude January’s issuance with E6bln of the new Mar-25 Schatz (ISIN: DE000BU22007) on offer. The coupon will be announced on Monday but based on current market pricing is likely to be around 2.50% - higher than the 2.20% seen on the Dec-24 issue.
• Germany will then return to the market on Wednesday to kick off February issuance with E5bln of the 10-year 2.30% Feb-33 Bund (ISIN: DE000BU2Z007) on offer.