BONDS: EGBs & Gilts Off Lows
Core global FI markets have stabilised after an early sell off, a downtick in oil provides cross-market support.
- Presence of the impending German 10-Year supply applied some pressure through early trade, while U.S. government shutdown headlines continue to dominate.
- A reminder that the U.S. NFP release, scheduled for Friday, is set to be delayed on the back of the shutdown.
- Bund futures trade as low as 128.24, before recovering to ~128.40. Initial support at the 128.26-29 zone was pierced, but not convincingly.
- German yields are 1-3bp higher curve steeper.
- Presence of the German supply and a recovery from worst levels in equities leaves major EGB spreads vs. Bunds flat to 1bp tighter.
- The NTMA confirmed that it will conduct one IRISH auction in Q4. No real reaction in IRISH spreads, although we think that the market would have been looking for no auctions in Q4, given precedent set in recent years.
- Gilts have also recovered from session lows, futures 90.70, bouncing from 90.54.
- Bears remain in technical control in that contract. Initial support and resistance located at 90.26 & 91.28, respectively.
- UK yields flat to 2.5bp higher, curve steeper.
- Ongoing UK fiscal deterioration helps keep the steepening technical trend intact. The latest round of reporting reaffirmed that Chancellor Reeves is set to scrap the two-child benefit limit, albeit with the potential for limitations given the potential for spiralling costs to cover larger families.
- ECB-dated OIS pricing little changed, showing ~8bp of further easing for the current cycle, while BoE-dated OIS shows less than 5bp of easing through year-end.
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USD: USDSEK is close to the 2025 low
- EURSEK falls to its lowest level since around mid June and eyeing at test at the Psychological 11.0000 level.
- Focus is still on the more interesting USDSEK, now through 9.4000, just ahead of the 2025 low at 9.3792.
EFSF ISSUANCE: Apr-29 / Feb-34 Tap Dual Tranche: Spread Set
Apr-29 tap:
- Spread set at MS+9 (guidance was MS+10bps area)
- Books at E3.3bln
- Coupon: 3.500% (150 days accrued), Annual ACT/ACT
- Maturity: 11 April 2029
- ISIN: EU000A2SCAL3
Feb-34 tap:
- Spread set at MS+33 (guidance was MS+34bps area)
- Books at E3.7bln
- Coupon: 2.875% (207 days accrued), Annual ACT/ACT
- Maturity: 13 February 2034
- ISIN: EU000A2SCAN9
Across both tranches:
- Size: E3.5bln maximum combined (MNI expected E3bln)
- Books combined: E7bn (incl. E500m JLMs)
- Settlement: 8 September 2025 (T+5)
- Bookrunners: LBBW / NOMURA (DM/B&D) / TD
- Denoms: EUR 1,000 x 1,000
- Target market: Professionals / Eligible Counterparties only (all distribution channels), each as defined in MiFID II
- Issuer: European Financial Stability Facility (EFSF)
- Ratings: Aaa (stable) / AA- (stable) / AA-
- Risk Weighting: 0%
- Format: RegS / Bearer Notes (TEFRA rules apply, no communications with or into the U.S.)
- Timing: Books close 11:00LDN | 12:00CET
COMMODITIES: Gold Starts the Week Sharply Higher, Targeting All Time Highs
A bear cycle in WTI futures remains intact and the latest recovery appears corrective. A key support at $61.99, the Jun 30 low, has recently been breached, strengthening a bearish theme. A continuation lower would open $57.71, the May 30 low. Key short-term resistance has been defined at $69.36, the Jul 30 high. Clearance of this level would cancel a bear theme. Initial resistance to watch is $66.56, the Aug 4 high. Gold is trading sharply higher today as the metal begins the week on a bullish note. The primary trend direction remains up and sights are on key resistance and the bull trigger at $3500.1, the Apr 22 all-time high. Clearance of this hurdle would confirm a resumption of the uptrend and open $3547.9, a Fibonacci projection. Initial firm support to watch lies at $3371.9, the 20-day EMA.
- WTI Crude up $0.35 or +0.55% at $64.34
- Natural Gas up $0.03 or +1.1% at $3.03
- Gold spot up $26.66 or +0.77% at $3474.77
- Copper up $1.3 or +0.28% at $460.4
- Silver up $0.96 or +2.42% at $40.6828
- Platinum up $22.27 or +1.62% at $1393.87
