BONDS: EGBs-GILTS CASH CLOSE: Curve Flattening Continues
Jul-31 18:00
Curves flattened for a third consecutive session Thursday.
- Longer-end yields moved lower at the open, with 10Y Bund yields touching their lowest intraday level since July 24 and Gilts July 7.
- The rest of the session was largely range-bound in nature, with weakness in European equities keeping yields contained amid solid-leaning US data.
- The short-end lagged, following Wednesday's hawkishly-perceived Federal Reserve meeting outcome.
- Reaction to European data was limited, including slight upside in German state-level, French and Italian flash July inflation readings.
- The German curve twist flattened, with the UK's bull flattening. Periphery/semi-core EGB spreads were mixed but little changed on the whole.
- Friday's schedule includes final July manufacturing PMIs and Eurozone flash July HICP.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 1bps at 1.964%, 5-Yr is down 0.1bps at 2.295%, 10-Yr is down 1.1bps at 2.695%, and 30-Yr is down 2.8bps at 3.176%.
- UK: The 2-Yr yield is down 1.5bps at 3.861%, 5-Yr is down 3.4bps at 4.007%, 10-Yr is down 3.4bps at 4.569%, and 30-Yr is down 3.9bps at 5.376%.
- Italian BTP spread down 0.1bps at 81.3bps / French up 0.4bps at 65.7bps
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EURGBP TECHS: Bullish Trend Conditions Remain Intact
Jul-01 18:00
- RES 4: 0.8694 High Apr 14
- RES 3: 0.8648 76.4% retracement of the Apr 11 - May 29 downleg
- RES 2: 0.8624 High Apr 21
- RES 1: 0.8597 High Jul 01
- PRICE: 0.8588 @ 16:18 BST Jul 1
- SUP 1: 0.8514/8482 20- and 50-day EMA values
- SUP 2: 0.8459 Low Jun 11
- SUP 3: 0.8407 Low Jun 4
- SUP 4: 0.8356 Low May 29 and the bear trigger
The trend condition in EURGBP remains bullish and Monday’s strong start to the week reinforces current conditions. Moving average studies have recently crossed and are currently in a bull-mode position - highlighting a dominant uptrend. 0.8592, 61.8% of the Apr 11 - May 29 downleg, has been pierced. Sights are on 0.8624, the Apr 21 high. Support to watch lies at 0.8482, the 50-day EMA. Clearance of this level would highlight a possible reversal.
LOOK AHEAD: Wednesday Data Calendar: June ADP Employment
Jul-01 17:50
- US Data/Speaker Calendar (prior, estimate)
- 07/02 0700 MBA Mortgage Applications (1.1%, --)
- 07/02 0730 Challenger Job Cuts YoY (47.0%, --)
- 07/02 0815 ADP Employment Change (37k, 95k)
- 07/02 1130 US Tsy $65B 17W bill auctions
- Source: Bloomberg Finance L.P. / MNI
BONDS: EGBs-GILTS CASH CLOSE: Flattening To Start The Quarter
Jul-01 17:49
European yields pulled back Tuesday in a flattening move.
- There was a strong rally in early trade, largely following the cue of US Treasuries as the month/quarter got underway.
- Gains faded by mid-afternoon in Europe, with US data releases showing firmer-than-expected job openings, and still-elevated manufacturing sector prices.
- The German curve bull flattened on the day, with the UK's twist flattening. Periphery/semi-core EGB spreads widened slightly, with Greece underperforming.
- In data, Spanish PMI beat expectations but Italy missed. Eurozone June flash inflation metrics came in line with consensus though ECB 1-year and 3-year ahead inflation expectations both eased.
- BoE's Bailey reiterated that the direction of rates continues to be downwards, while ECB's Lagarde repeated that there was no commitment to any particular rate path.
- Wednesday's calendar includes labor market data for Italy, Spain and the Eurozone, and commentary from dovish BoE dissenter Taylor.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 1.2bps at 1.849%, 5-Yr is down 2.2bps at 2.148%, 10-Yr is down 3.3bps at 2.574%, and 30-Yr is down 4.7bps at 3.053%.
- UK: The 2-Yr yield is up 1bps at 3.827%, 5-Yr is down 1.4bps at 3.936%, 10-Yr is down 3.5bps at 4.454%, and 30-Yr is down 5bps at 5.229%.
- Italian BTP spread up 0.6bps at 87.5bps / Greek up 2.1bps at 71.1bps
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