BONDS: EGBs-GILTS CASH CLOSE: Geopolitical Relief Rally
Mar-04 18:57
European yields mostly fell Wednesday, with Gilts outperforming Bunds.
- Nascent signs of de-escalation in the Middle East conflict helped yields pull back sharply in early trade.
- There was notable outperformance at the front end of curves in contrast to the prior two sessions' energy price related bear-flattening sell-off across EGBs and Gilts.
- Various geopolitical headlines buffeted energy prices (and thus FI) throughout, though on net Gilts would see more relief than Bunds given the former's underperformance earlier in the week, particularly at the front-end.
- In data, final February PMIs largely confirmed flashes; in new data, Italian Composite PMI hit a 3-month high while Spain's report was indicative of fading growth momentum.
- Yields would close near the lows, with the German curve twist steepening on the day while the UK's bull steepened.
- Periphery/semi-core EGB spreads tightened 2-4bp, reversing the prior session's risk-off move.
- On Thursday's calendar are Spanish and French industrial production data and Italian and Eurozone retail sales, in addition to the UK DMP survey. There are also appearances by ECB's Rehn, Nagel, and Lagarde.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 2.5bps at 2.13%, 5-Yr is down 1bps at 2.369%, 10-Yr is down 0.2bps at 2.75%, and 30-Yr is up 1.5bps at 3.401%.
- UK: The 2-Yr yield is down 2.9bps at 3.705%, 5-Yr is down 3.1bps at 3.93%, 10-Yr is down 3bps at 4.441%, and 30-Yr is down 1.7bps at 5.157%.
- Italian BTP spread down 2.5bps at 67.8bps / French OAT down 3.4bps at 60.7bps
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PIPELINE: Corporate Bond Update: $25B Oracle 8Pt Jumbo Debt Launched
Feb-02 18:50
Oracle's latest 8Pt jumbo issuance of $25B puts it in the top-10 largest issuers on record:
- Date $MM Issuer (Priced *, Launch #)
- 02/02 $25B #Oracle $3B 3Y +95, $500M 3Y SOFR+111, $3.5B 5Y +115, $3B +7Y +130, $5B 10Y +145, $2.25B 20Y +170, $5B 30Y +180, $2.75B 40Y +195
- 02/02 $2.6B #GE Vernova $600M 5Y +45, $1B 10Y +65, $1B 30Y +78
BONDS: EGBs-GILTS CASH CLOSE: Gilts Outperform Bunds At Start Of Busy Week
Feb-02 18:49
Gilts outperformed Bunds at the start of a busy week for European risk events.
- EGBs and Gilts caught a bid early in a risk-off move after precious metals' price collapse Friday and equity weakness in Asia-Pac trade coming out of the weekend.
- Global bonds pulled back with US Treasuries after the day's key data point, ISM Manufacturing, had one of its largest upside surprises in decades.
- On the day, the German curve leaned bear flatter with the UK's slightly bull steeper.
- Periphery/semi-core EGB spreads were little changed, including BTPs after widening early despite Italy's ratings outlook getting revised to Positive from Stable by S&P on Friday.
- OATs, too, were largely unchanged; after the cash close France's parliament adopted a 2026 budget after no-confidence votes against the government failed (this had been expected).
- Focus remains on the January flash inflation data to come this week (including Eurozone on Wednesday) and of course the BOE and ECB decisions on Thursday.
Closing Yields / 10-Yr EGB Spreads To Germany:
- Germany: The 2-Yr yield is up 2.5bps at 2.114%, 5-Yr is up 3.1bps at 2.448%, 10-Yr is up 2.5bps at 2.868%, and 30-Yr is up 2.2bps at 3.516%.
- UK: The 2-Yr yield is down 1.5bps at 3.703%, 5-Yr is down 1.4bps at 3.936%, 10-Yr is down 1.6bps at 4.506%, and 30-Yr is down 1.2bps at 5.273%.
- Italian BTP spread up 0.1bps at 61.4bps / Spanish down 0.4bps at 36.5bps
GBPUSD TECHS: Corrective Cycle
Feb-02 18:30
- RES 4: 1.3913 High Sep 14 2021
- RES 3: 1.3889 1.00 proj of the Nov 4 - Jan 6 - Jan 19 price swing
- RES 2: 1.3868 High Jan 27 and the bull trigger
- RES 1: 1.3814 High Jan 30
- PRICE: 1.3640 @ 16:09 GMT Feb 02
- SUP 1: 1.3623 Low Feb 02
- SUP 2: 1.3578 20-day EMA
- SUP 3: 1.3471 25-day EMA
- SUP 4: 1.3402 Low Jan 22
GBPUSD has pulled back from its recent highs. The move down is considered corrective and a continuation lower would allow a recent overbought condition to unwind. The initial firm support to watch is at the 20-day EMA, at 1.3578. Support at the 50-day EMA lies at 1.3471. The medium-term trend theme remains bullish. The bull trigger has been defined at 1.3868, the Jan 27 high.
