BONDS: EGBs-GILTS CASH CLOSE: Curves Close Mixed, But End Week Steeper
Jun-27 17:14
European yields rose slightly on Friday, with mixed dynamics across curves.
- Core FI was under a bit of pressure in early trade, with factors including higher-than-expected June flash inflation readings for France and Spain, as well as a broader risk-on bid on US trade optimism.
- European yields ticked lower after a weak US personal spending data release, but would spend the rest of the session trading in volatile fashion amid limited volumes.
- In other data, EC economic sentiment was weaker than expected in June, and though French consumer spending beat expectations in May, underlying momentum remains weak.
- Yields closed higher, with the German curve bear flattening and the UK's lightly bear steepening. 2Y - 5Y Gilts outperformed German counterparts, but it was vice versa further down the curve with Bund and Buxl outperforming 10-30Y Gilts.
- Periphery/semi-core EGB spreads tightened modestly.
- For the week, both the UK and German steepened, with Gilts easily outperforming: Germany 2Y +1.0bp/10Y +7.5bp, UK 2Y -8.0bp/10Y -3.3bp.
- Next week sees the remaining flash Eurozone June CPIs (MNI preview here), along with several speakers at the ECB's Sintra Forum.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 3.5bps at 1.86%, 5-Yr is up 2.9bps at 2.163%, 10-Yr is up 2.3bps at 2.592%, and 30-Yr is unchanged at 3.07%.
- UK: The 2-Yr yield is up 1.2bps at 3.839%, 5-Yr is up 1.9bps at 3.968%, 10-Yr is up 3.2bps at 4.504%, and 30-Yr is up 1.9bps at 5.272%.
- Italian BTP spread down 0.3bps at 88.1bps / French OAT down 0.2bps at 67.9bps
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US TSYS/SUPPLY: Record High Indirect Takeup Highlights Strong 5Y Auction
May-28 17:12
The 5Y Note auction was typically solid in May, with the 4.071% high yield representing a 0.4bp trade-through versus the 4.075% when-issued yield at auction cutoff.
- This was the 6th 5Y auction in the last 7 to trade through, and May's sale came with more solid peripheral statistics than usual:
- A record (going back to data from the early 2000s) high 78.4% takedown by indirects (seen by some as a proxy for foreign investors) was a highlight, and well up from the 69.0% prior 5-auction average.
- And primary dealers took down just 9.2% of competitives, below the 11.7% average of the prior 5 auctions, and the lowest since January 2023 - which was in turn the lowest on record (going back to the early 2000s).
- Bid-cover of 2.39x was exactly in line with the 5-auction average.
- Market reaction was positive: 5s richened about 0.5bp on the 2s5s7s butterfly, with 10Y yields down 1.4bp to 4.477%.
FED: US TSY 5Y NOTE AUCTION: HIGH YLD 4.071%; ALLOTMENT 23.12%
May-28 17:02
- US TSY 5Y NOTE AUCTION: HIGH YLD 4.071%; ALLOTMENT 23.12%
- US TSY 5Y NOTE AUCTION: DEALERS TAKE 9.24% OF COMPETITIVES
- US TSY 5Y NOTE AUCTION: DIRECTS TAKE 12.39% OF COMPETITIVES
- US TSY 5Y NOTE AUCTION: INDIRECTS TAKE 78.37% OF COMPETITIVES
- US TSY 5Y AUCTION: BID/CVR 2.39
EURUSD TECHS: Corrective Pullback
May-28 17:00
- RES 4: 1.1625 1.500 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 3: 1.1608 High Nov 9 2021
- RES 2: 1.1573 High Apr 21 and the bull trigger
- RES 1: 1.1453 76.4% retracement of the Apr 21 - May 12 bear leg
- PRICE: 1.1298 @ 16:16 BST May 28
- SUP 1: 1.1277 20-day EMA
- SUP 2: 1.1151/1.1065 50-day EMA and a pivot level / Low May 12
- SUP 3: 1.1026 38.2% retracement of the Feb 3 - Apr 21 bull cycle
- SUP 4: 1.0943 Low Apr 10
Trend conditions in EURUSD are bullish and MA studies are in a bull mode position, highlighting a dominant uptrend. The latest pullback is corrective. The Apr 21 - May 12 bear leg also appears to have been a correction. A resumption of gains would open 1.1453, a Fibonacci retracement. Key support is 1.1151, the 50-day EMA. A clear break of the average would highlight a stronger reversal and signal scope for a deeper retracement.
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