EUROZONE ISSUANCE: EGB Supply
Italy, Cyprus and Belgium all still look to issue this week. The EU, the Netherlands, Italy, Germany and Greece have already come to the market. We pencil in gross nominal issuance of E32.3bln from scheduled issuance operations this week, almost double last week’s E16.8bln.
- This morning, Italy will look to hold its 5/10-year BTP and CCTeu auctions: it will look to sell E2.5-3.0bln of the on-the-run 5-year 3.40% Apr-28 BTP (ISIN: IT0005521981) and E3.0-3.5bln of the on-the-run 10-year 4.40% May-33 BTP (ISIN: IT0005518128). It will also look to sell E1.00-1.25bln of the 0.65% Apr-29 CCTeu (ISIN: IT0005451361) and E1.00-1.25bln of the 0.75% Oct-30 CCTeu (ISIN: IT0005491250).
- Cyprus announced on Monday that it was holding investor calls both today and tomorrow to present its “newly established Sustainable Finance Framework” with an inaugural Sustainable Bond to follow, subject to market conditions. We pencil in a Thursday transaction with a E1.0bln transaction size (in line with the guidance from the 2023 annual funding plan).
- On Friday, Belgium will conclude issuance for the week with an ORI Facility operation (we pencil in a E500mln size across two off-the-run OLOs). Details will be announced Thursday afternoon.
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EUROSTOXX50 TECHS: (H3) Channel Support Remains Intact
- RES 4: 4446.00 3.00 proj of the Sep 29 - Oct 4 rally from Dec 20 low
- RES 3: 4409.50 High Nov 18 2021 and a major resistance
- RES 2: 4381.50 High Jan 5 2022 (cont)
- RES 1: 4323.00 High Feb 16 and the bull trigger
- PRICE: 4253.00 @ 05:31 GMT Feb 28
- SUP 1: 4174.50 Bull channel base drawn from the Oct 13 low
- SUP 2: 4126.90 50-day EMA
- SUP 3: 3955.00 Low Jan 5
- SUP 4: 3753.00 Low Dec 20 and a key support
Eurostoxx 50 futures traded higher Monday and price remains above Friday’s low of 4175.00. Key support to watch is 4174.50, the base of a bull channel drawn from the Oct 13 low. While channel support holds, the broader uptrend remains intact and a continuation higher near-term would expose the bull trigger at 4323.00, Feb 16 high. A break of this hurdle would resume the broader uptrend. A breach of the channel base would alter the picture.
AUSSIE BONDS: Market Looks Through Upside Data Surprises To Slowing Trends
Despite stronger than expected prints for January retail sales, private sector credit and Q4 current account data (although a modest miss for net exports contribution to GDP), ACGBs deliver a post-data reversal to close nearer to Sydney session highs with YM +4.0 and XM +2.5. Cash benchmarks run 2-4bp richer with the 3/10 curve steepening 3bp.
- The AU/US cash 10-year yield differential closes -3bp at -8bp.
- 3s10s swaps curve bull steepens with rates 2-4bp lower.
- Bills were 1 cheaper to 4bp firmer through the reds, with only IRH3 finishing softer.
- RBA dated OIS gives back 2-5bp of yesterday’s +7-12bp firming for meetings beyond June, with terminal rate pricing back at 4.30% versus last week’s high of 4.35%.
- The market chose to look through today’s upside data surprises, instead focusing on the slowing underlying trends. Despite today’s beat, the volatile Nov-Jan period for retail sales leaves the average monthly change (+0.1% M/M) significantly slower than the average monthly change for the period Aug-Oct (+0.7% M/M). On the private credit front as well, today’s upside surprise did little to arrest the appreciable slowing in the monthly pace of credit growth from +0.9% in April last year to +0.4% in January.
- Tomorrow sees the release of Q4 GDP (BBG consensus forecast is +0.8% Q/Q) and the relatively new, but increasingly important, monthly read on the CPI. We will also hear from RBA's Jones.
EURUSD TECHS: Bear Cycle Remains In Play
- RES 4: 1.0803 High Feb 14 and a key short-term resistance
- RES 3: 1.0745 High Feb 15
- RES 2: 1.0665 50-day EMA
- RES 1: 1.0620 High Feb 27
- PRICE: 1.0585 @ 05:34 GMT Feb 28
- SUP 1: 1.0533 Low Feb 27
- SUP 2: 1.0484 Low Jan 6 and a key support
- SUP 3: 1.0461 38.2% retracement of the Sep 28 - Feb 2 bull leg
- SUP 4: 1.0436 2.0% 10-dma envelope
EURUSD is trading closer to its recent lows despite yesterday’s gains and remains in downtrend. The recent break of the 50-day EMA, at 1.0665, reinforces bearish conditions and attention is on 1.0484, the Jan 6 low. A break of this level would expose 1.0461, the 38.2% retracement of the Sep 28 - Feb 2 bull cycle. Clearance of the 1.0484/61 support zone would strengthen the bearish theme. Initial resistance to watch is 1.0665.
