EUROZONE ISSUANCE: EGB Supply – W/C 10 November
The Netherlands, Germany and Italy will look to hold auctions in the upcoming week. We pencil in issuance of E12.2bln for the week, down notably from E34.8bln this week.
- The Netherlands will kick off issuance for the week market on Tuesday with E2.0-2.5bln of the on-the-run 10-year 2.50% Jul-35 DSL (ISIN: NL0015002F72) on offer.
- Germany will look to hold a 30-year Bund auction on Wednesday with 1.0bln of the 2.50% Aug-46 Bund (ISIN: DE0001102341) on offer alongside E1.5bln of the 2.90% Aug-56 Bund (ISIN: DE000BU2D012).
- Italy will then come to the market on Thursday to hold a 3/7/15+ year BTP auction. Details will be confirmed on Monday. We look for the on-the-run 3-year 2.35% Jan-29 BTP (ISIN: IT0005660052) and the on-the-run 7-year the 3.25% Nov-32 BTP (ISIN: IT0005668220) to be on offer, but think there is a good chance that one or both of these are reopened alongside other off-the-run BTPs. We have little conviction regarding the 15+ year BTP that will be on offer.
NOMINAL FLOWS: The upcoming week will see redemptions of just E0.4bln while coupon payments for the week will be negligible. This leaves estimated net flows for the week at positive E11.7bln, down from positive E15.7bln this week.
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GBPUSD TECHS: Short-Term Bear Cycle Intact
- RES 4: 1.3789 High Jul 1 and key resistance
- RES 3: 1.3726 High Sep 17
- RES 2: 1.3661 High Sep 18
- RES 1: 1.3537 High Sep 23 and a pivot level
- PRICE: 1.3408 @ 16:19 BST Oct 8
- SUP 1: 1.3324 Low Sep 25 and the bear trigger
- SUP 2: 1.3282 Low Aug 6
- SUP 3: 1.3254 Low Aug 4
- SUP 4: 1.3144 38.2% retracement of the Jan 13 - Jul 1 bull cycle
The short-term condition in GBPUSD remains bearish. Initial key resistance to watch is unchanged at 1.3537, the Sep 23 high and a near-term pivot level. Clearance of this hurdle would signal a potential reversal. Attention is on support at 1.3333, the Sep 3 low. It has recently been pierced, a clear breach of this support would strengthen a bearish theme and open 1.3282, the Aug 6 low.
US: FED Reverse Repo Operation
RRP usage inches up to $5.231B with 14 counterparties this afternoon vs. yesterday's $4.622B (lowest level since early April 2021). Compares to this year's high usage of $460.731B on June 30.
US TSYS/SUPPLY: Review 10Y Auction Re-Open
- Treasury futures holding narrow range (TYZ5 +.5 at 112-22, yld 4.1171%) after the $39B 10Y note auction re-open (91282CNT4) tailed: drawing 4.117% high yield vs. 4.112% WI; 2.45x bid-to-cover vs. 2.65x prior.
- Peripheral stats: indirect take-up retreats to 66.80% vs. 83.13% prior; direct bidder take-up rebounds to 24.1% from 12.66% prior; primary dealer take-up 9.09% vs. 4.21% prior.
- The next 10Y auction is tentatively scheduled for November 12.
