EUROZONE ISSUANCE: EGB Supply
Italy is due to return to the market on Friday. In addition, Slovakia, the EU, Italy, Germany, Finland and Luxembourg have already held institutional issuance operations this week. Subscriptions for Belgium’s retail state bonds are due to begin on Thursday. We pencil in estimated gross issuance (ex-retail) for the week at E28.4bln, down from an estimated E37.8bln last week.
- On Friday, Italy will return to the market to hold a BTP Short Term / BTPei auction. As expected, we will see the launch of the new 3.20% Jan-26 BTP Short Term (ISIN: IT0005584302). Alongside this E0.5-1.0bln of the 5-year 1.50% May-29 BTPei (ISIN: IT0005543803) and E250-500mln of the 20-year 2.55% Sep-41 BTPei (ISIN: IT0004545890) will be on offer.
- As we didn’t see the 0.10% May-33 BTPei (ISIN: IT0005482994) reopened, we look for a new long 10-year BTPei to be launched via syndication, potentially as early as the first quarter of the year. There is also a chance that a new 10-year BTPei could potentially be launched via auction.
- Note that subscriptions for the next retail-only Belgium State Bonds (Bons d’Etat) will open on Thursday 22 February. Belgium plans to launch a new 1-year issue (ISIN: BE3871294240) and a new 3-year issue (ISIN: BE3871295254). The subscription window is planned to be open until Friday 1 March but there is a possibility of an early close. The BDA has announced that there will be a combined limit of E6.0bln across the two issues. For more on the State Bonds see the PDF.
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BTP TECHS: (H4) Watching Support At The 50-Day EMA
- RES 4: 122.63 High Dec 7 2022 (cont)
- RES 3: 122.18 3.00 proj of the Nov 10 - 17 - 24 price swing
- RES 2: 121.43 2.764 proj of the Nov 10 - 17 - 24 price swing
- RES 1: 119.23/77 High Jan 12 / 4
- PRICE: 117.96 @ Close Jan 23
- SUP 1: 117.06 Low Jan 18
- SUP 2: 116.60 50-day EMA
- SUP 3: 115.18 Low Dec 4
- SUP 4: 114.10 50.0% retracement of the Oct 19 - Dec 27 bull cycle
BTP futures traded lower last week and a bearish corrective cycle remains in play. Price has recently traded below the 20-day EMA and last week’s move lower delivered a print below support at 117.24, the Jan 5 low. This opens the 50-day EMA at 116.60 - the next key support. Initial firm resistance has been defined at 119.23, the Jan 12 high. A reversal higher and a break of this level would highlight a base.
JPY: Firmer On Ueda Comments
JPY sees a light bid as BoJ Governor Ueda notes that the Bank will examine whether to continue its sizeable monetary easing, including negative interest rates, when the Bank’s inflation target is in sight.
- He also noted that the economy is evolving in line with the Bank’s forecast and stressed the need to assess data at each meeting.
- Ueda then flagged that the Bank is watching the impact of the Noto Peninsula earthquake closely, while suggesting it is too soon to grasp the full impact of that event.
- USD/JPY ticks to fresh session lows of Y147.35, first support is seen at the Jan 17 low (Y147.08).
EUROZONE ISSUANCE: EGB Supply - Rest of Week
- Germany will return to the market on Wednesday with a 15-year Bund auction. On offer will be E1.5bln of the on-the-run 1.00% May-38 Bund (ISIN: DE0001102598) alongside E500mln of the 2.50% Aug-46 Bund (ISIN: DE0001102341).
- Also on Wednesday, Portugal will look to sell a combined E1.5-1.75bln of 5/20-year OTs: the on-the-run 5-year 2.125% Oct-28 OT (ISIN: PTOTEVOE0018), the on-the-run 20-year 1.15% Apr-42 OT (ISIN: PTOTEPOE0032) and the off-the-run 20-year 4.10% Feb-45 OT (ISIN: PTOTEBOE0020).
- On Thursday, Italy will come to the market for a BTP Short Term and 5/15-year BTPei auction. On offer will be E2.0-2.5bln of the 3.60% Sep-25 BTP Short Term (ISIN: IT0005557084), E0.5-1.0bln of the 1.50% May-29 BTPei (ISIN: IT0005543803) and E0.75-1.50bln of the 2.40% May-39 BTPei (ISIN: IT0005547812).
- Greece will potentially hold a syndication in the week, with a launch of a new 10-year GGB most likely. Issue sizes over past few years have generally been E3.0-3.5bln, but given the strong demand at other EGB syndications recently, we see a chance that this deal is potentially upsized. Note that if Greece is to come to the market this week, we would expect to need the mandate to be announced today. It's unlikely the transaction would take place on Thursday (ECB meeting) or Friday.
