BONDS: EGBs-GILTS CASH CLOSE: Edges Higher On Soft Data
European FI gained slightly on Tuesday, retracing some of the previous session's weakness.
- Gains were fairly steady through the session, with few major headline/macro catalysts, amid a backdrop of data that was largely on the weaker side of expectations.
- Spanish April preliminary HICP came in firmer than expected, though Spanish GDP came in soft.
- ECB consumer inflation expectations rose for both 1Y and 3Y, though the EC Economic Sentiment survey was weaker than expected.
- Below-consensus US job openings and consumer confidence readings added to the theme.
- ECB's Stournaras sounded cautious on moving rates below 2% (from 2.25% at present); an MNI sources piece debate within the Governing Council ahead of the June rate decision.
- Both the German and UK curves bull flattened, with 10Y Gilts touching 3-week lows. Periphery/semi-core EGB spreads widened modestly, with Portugal underperforming.
- Wednesday's calendar includes French GDP and German retail sales/unemployment, but the highlight will be German, French, and Italian flash April inflation.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 0.6bps at 1.736%, 5-Yr is down 1.5bps at 2.044%, 10-Yr is down 2.4bps at 2.497%, and 30-Yr is down 2bps at 2.927%.
- UK: The 2-Yr yield is down 2.3bps at 3.843%, 5-Yr is down 2.8bps at 3.958%, 10-Yr is down 2.9bps at 4.48%, and 30-Yr is down 2.6bps at 5.244%.
- Italian BTP spread up 0.2bps at 111bps / Portuguese up 1.3bps at 55.3bps
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USDCAD TECHS: Bullish Outlook
- RES 4: 1.4700 Round number resistance
- RES 3: 1.4641 76.4% retracement of the Feb 3 - 14 bear leg
- RES 2: 1.4452/4543 High Mar 13 / 4 and a bull trigger
- RES 1: 1.4402 High Mar 20
- PRICE: 1.4292 @ 16:50 GMT Mar 28
- SUP 1: 1.4235 Low Mar 26 and a key near-term support
- SUP 2: 1.4151/4107 Low Feb 14 / 50.0% of Sep 25 - Feb 3 bull run
- SUP 3: 1.4011 Low Dec 5 ‘24
- SUP 4: 1.3944 61.8% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
USDCAD traded through support at 1.4242 on Wednesday but has recovered. A return lower and clearance of this level would undermine the bull theme and instead highlight potential for a test of 1.4151, the Feb 14 low and a bear trigger. Moving average studies continue to highlight a dominant uptrend. A reversal higher would refocus attention on the bull trigger at 1.4543, the Mar 4 high. First resistance is 1.4402, the Mar 20 high.
US FISCAL: Debt Limit "Extraordinary Measures" Pick Up, But Cash Dipping Pre-Tax
Treasury data shows that there were $207B of "extraordinary measures" available to circumvent hitting the debt limit as of Wednesday Mar 26.
- That's the most since Jan 27th and up from $163B a week earlier, from a total $376B available.
- However, Treasury cash in the TGA fell to $316B as of the 26th (and was down to $280B on Thursday), meaning there were a combined $523B of resources available to avert the debt limit, the lowest since the impasse began in January (and half of the starting amount of just over $1T).
- The next couple of weeks will be very important for Treasury, as they represent the biggest tax take of the year. The Congressional Budget Office reported this week that per its estimates "if the debt limit [$36.1T] remains unchanged, the government's ability to borrow using extraordinary measures will probably be exhausted in August or September 2025." Treasury wrote to Congress this month that they would be able to provide an update on the x-date in the first half of May, after the conclusion of tax season.
AUDUSD TECHS: Remains Above Support
- RES 4: 0.6429 High Dec 12 ‘24
- RES 3: 0.6414 38.2% retracement of the Sep 30 ‘24 - Feb 3 bear leg
- RES 2: 0.6409 High Feb 21 and a bull trigger
- RES 1: 0.6391 High Mar 17 / 18
- PRICE: 0.6291 @ 16:46 GMT Mar 28
- SUP 1: 0.6258 Low Mar 21
- SUP 2: 0.6187 Low Feb 4
- SUP 3: 0.6171/6088 Low Feb 4 / 3 and a key support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
AUDUSD is unchanged. A short-term bull theme is intact and the latest move down appears corrective. Key short-term support to watch is 0.6187, the Mar 4 low. Clearance of this level would reinstate a bear threat. First support is at 0.6258, the Mar 21 low. A stronger recovery would refocus attention on 0.6409, the Feb 21 high. Clearance of this hurdle would strengthen the bull cycle and resume the uptrend that started Feb 3.
