EGBS: French Political Developments In Focus Ahead Of PM Adress
French political developments ahead of PM Bayrou’s general policy address at 1400GMT/1500CET have dominated EGB-specific news flow this morning. Although Socialist leader Faure suggested an agreement with his party and the ruling government was possible this morning, the PM has since pushed back on changes to Macron’s pension reform law.
- That helps the 10-year OAT/Bund spread widen back above ~83bps, up from an intraday low of 82bps earlier. The spread remains 1bp tighter today though.
- Bund futures have moved further away from session highs, now -14 ticks at 130.68. Alongside the aforementioned French developments, a bid in European equities and supply-related pressure has weighed on major EGB futures.
- 10-year peripheral spreads to Bunds have tightened on the equity rally. The BTP/ Bund spread is 2bps tighter at 118.5bps, down from yesterday’s intraday high of almost 124bps. Italian November industrial production was stronger-than-expected at 0.3% M/M (vs 0.1% cons), but the underlying trend remains weak.
- The spread has been set for today’s 10-year GGB and 3/30-year EU-bond syndications. The EU syndication will have a joint size of E11bln, in line with MNI’s expectations. E5bln of the new 2.40% Apr-30 Bobl was also issued this morning.
- ECB’s Holzmann continued to express a preference for a cautious easing cycle, given persistent core inflation pressures.
- The US calendar is headlined by PPI at 1330GMT.
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MACRO ANALYSIS: MNI US Macro Weekly: Inflation Data Keep Fed Cut On Track
We have published and e-mailed to subscribers the MNI US Macro Weekly offering succinct MNI analysis across the range of macro developments over the past week. Please find the full report here:
USDCAD TECHS: Fresh Cycle High
- RES 4: 1.4393 2.0% 10-dma envelope
- RES 3: 1.4327 2.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4296 2.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4246 2.00 proj of the Oct 17 - Nov 1 - 6 price swing
- PRICE: 1.4236 @ 16:38 GMT Dec 13
- SUP 1: 1.4069/3944 20- and 50-day EMA values
- SUP 2: 1.3928 Low Nov 25 and a key support
- SUP 3: 1.3822 Low Nov 6
- SUP 4: 1.3747 Low Oct 17
The trend direction in USDCAD remains up and this week’s gains to a fresh cycle high, reinforces the current bullish theme. The pair has cleared 1.4178, the Nov 26 high, to confirm resumption of the uptrend and maintain the price sequence of higher highs and higher lows. Sights are on 1.4246 next, a Fibonacci projection. Key short-term support has been defined at 1.3928, the Nov 25 low. Initial support to watch lies at 1.4069, the 20-day EMA.
US TSYS: Extending Late Session Lows, Curves Bear Steepen Ahead Next Wed's FOMC
- Treasuries traded steadily lower throughout Friday's session, initially mirroring weak action in Bunds and Gilts. By the close, the Mar'25 10Y contract slipped to 109-26 (-18) the lowest level since November 22, 10Y yield rising to 4.4046% high (+.0768).
- Initial technical support at 109-22 (76.4% Nov 15 - Dec 6 Upleg) followed by 109-20 (Low Nov 20/21).
- Curves bear steepened: 2s10s +2.272 at 15.568 as short end rates outperformed ahead of next week's FOMC policy announcement where another 25bp rate cut was expected but not certain amid current macro and political uncertainty. That said, the latest unemployment and inflation data have kept the FOMC on track to cut the federal funds rate by 25bp (to 4.25-4.50%) next Wednesday.
- Projected rate cuts into early 2025 look near steady to lower vs. this morning levels (*) as follows: Dec'24 cumulative -24.3bp (-23.7bp), Jan'25 -28.6bp (-29.6bp), Mar'25 -42.2bp (-43.9bp), May'25 -48.4bp (-50.5bp).
- No reaction to this morning's import/export prices, Monday brings flash S&P Global PMIs, Retail Sales, IP & Cap-U on Tuesday.
