BONDS: EGBs-GILTS CASH CLOSE: Ending The Week With Twist Flattening
European curves lightly twist flattened Friday, with long-end instruments continuing to rally.
- Core instruments opened the session relatively flat following Thursday's rally, and drifted higher through the European morning.
- Eurozone inflation data was an early focus, with Germany surprising slightly to the upside, but Spain softer-than-expected (Italy's was in line).
- A risk-off move in equities triggered by US President Trump's accusation that China has "totally violated" their trade agreement helped trigger a safe haven bid, while weaker-than-expected MNI Chicago PMI maintained EGB/Gilt strength.
- After a small retracement as markets eyed month-end, yields closed nearer to their session lows than their highs.
- The German and UK curves both twist flattened. For the week as a whole, curves also twist flattened, with Bunds outperforming Gilts. German 2Y +1.2bp/10Y -6.7bp; UK 2Y +4.0bp/10Y -3.4bp.
- Periphery / semi-core spreads were mixed, with Portugal outperforming.
- Ratings reviews scheduled for after the market close Friday include S&P on France.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 0.7bps at 1.776%, 5-Yr is down 0.4bps at 2.064%, 10-Yr is down 0.8bps at 2.5%, and 30-Yr is down 0.7bps at 2.98%.
- UK: The 2-Yr yield is up 2.8bps at 4.023%, 5-Yr is up 1.6bps at 4.144%, 10-Yr is down 0.1bps at 4.647%, and 30-Yr is down 2.4bps at 5.372%.
- Italian BTP spread down 0.1bps at 98bps / Portuguese down 2.3bps at 47.5bps
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EURGBP TECHS: Bear Cycle Extends
- RES 4: 0.8781 2.236 proj of the Mar 3 - 11 - 28 price swing
- RES 3: 0.8768 High Nov 20 ‘23
- RES 2: 0.8624/0.8738 High Apr 21/ High Apr 11 and the bull trigger
- RES 1: 0.8557 High Apr 28
- PRICE: 0.8500 @ 16:28 BST Apr 30
- SUP 1: 0.8482 Low April 30
- SUP 2: 0.8477/60 61.8% of the Mar 28 - Apr 11 rally / 50-day EMA
- SUP 3: 0.8415 76.4% retracement of the Mar 28 - Apr 11 rally
- SUP 4: 0.8316 Low Mar 28 and a key support
EURGBP was sold off a mid-session rally, keeping the technical picture intact and highlighting a continuation of the current bear cycle. Sights are on 0.8477, a Fibonacci retracement point where a break would strengthen the bearish theme. Support at the 50-day EMA, is at 0.8460. It is still possible that the move down that started Apr 11, is a correction. A reversal and a resumption of gains would open 0.8738, the Apr 11 high and bull trigger.
US: FED Reverse Repo Operation
RRP usage jumps to $250.601B this afternoon from $157.537B yesterday. So far this year, usage had fallen to $54.772B last Wednesday, April 16 -- lowest level since April 2021. Conversely, usage had surged to the highest level since December 31, 2024 on Monday, March 31: $399.167B. The number of counterparties climbs to 54 from 37 yesterday.
PIPELINE
CAD: USDCAD At Session Lows On Trump-Carney Meetup Prospects
USDCAD dips to session lows of 1.3788 after US President Trump says that PM Carney will visit the White House within the next week, after Carney - as Trump put it - said "let's make a deal". Yesterday Carney said post-election that he'd speaking to Trump and the two had agreed to meet soon but this adds to the certainty and suggests Trump is positively disposed to a thawing in relations.
- It's now outperforming most G10 peers, down 0.32% on the day in CAD's favor, and nearing 1.3781 - Apr 21 low (which was the lowest since Oct 2024) and the bear trigger per our tech analyst - beyond there, potential is seen for a move towards 1.3744, a Fibonacci retracement.
