EGBS: Futures Rally To Fresh Session Highs; Brush Aside German Spending Sources
May-07 09:34
Major EGB futures have rallied to fresh session highs over the last 60 minutes, led by semi-core/peripherals. The space largely brushed aside a Reuters sources article detailing German defence spending plans, with the piece lacking clarity on whether the touted E60bln of additional spending is for 2025 alone or split across the current parliamentary term.
- The limited reaction in German swap spreads suggests the story is consistent with pre-existing sell-side estimates of defence spending increases.
- Bund futures are +16 ticks at 131.07, with initial resistance seen at 131.24 (Apr 5 high). That shields key resistance and the bull trigger at 132.03 (Apr 7 high).
- OAT and BTP futures are up ~25 ticks each, with no obvious driver of outperformance versus Bunds. Today’s LT OAT auction was solid, but doesn’t seem to be enough to account for the outperformance.
- The German curve has bull flattened, with 30-year yields 3bps lower on the session. 10-year EGB spreads to Bunds are now up to 2bps tighter.
- Italy has held a buyback transaction this morning.
- Eurozone March retail sales were in line with consensus at -0.1% M/M, vs a one tenth downwardly revised 0.2% prior.
- Global macro focus turns to this evening's FOMC decision.
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GERMAN T-BILL AUCTION RESULTS: 6-Month Bubill
Apr-07 09:32
| Type | 6-month Bubill |
| Maturity | Oct 15, 2025 |
| Allotted | E1.5bln |
| Previous | E1.14bln |
| Total sold | E2bln |
| Target | E2bln |
| Avg yield | 1.935% |
| Previous | 2.166% |
| Bid-to-cover | 1.51x |
| Previous | 1.63x |
| Bid-to-offer | 1.14x |
| Previous | 0.93x |
| Previous date | Mar 03, 2025 |
FOREX: Bear Cycle Grips Markets, AUDJPY at a New Low
Apr-07 09:28
- The bear cycle for equities continues to grip markets, with no end in sight for the aggressive risk sell-off. European equity markets have dropped a further 5% from the open Monday, with Asia-Pac markets particularly weak. Hong Kong's Hang Seng Index stepped lower by 13% into the close, entering a bear market and shrugging off any support garnered from Chinese state-run institutions openly buying in mainland equity markets.
- With European equities gapping lower at the open, it's no surprise to see JPY getting further support through Asia-Pac trade and maintaining that poise into early Europe. There is little sign that the risk-off trade has bottomed, evident in the new pullback low for AUDJPY at Y86.15 overnight, the lowest print since Mar'23's Y86.06, and 2022 before that.
- NOK/CHF trades similarly, defining both ends of the G10 FX table today, making for a convincing break through the 8.00 handle at the open as the cross becomes another strong indicator of risk.
- Focus turns to the imminent meeting of European leaders in Poland, at which the EU are said to be open to all options for retaliation against Trump's trade measures detailed last week. Options include a raise on levies for US goods headed to Europe, as well as more stringent regulation on big tech firms, and profits earned by US firms on the continent.
- The US President's schedule today consists of a meeting with the Israeli Prime Minister, but any comments concerning tariffs and the sensitivity of global markets will be carefully watched. Fed's Kugler is set to be speaking, commenting on inflation dynamics and the Phillips curve at 1530BST/1030ET.
EGBS: Bunds Off Session Highs As Equities Find Short-term Base
Apr-07 09:26
Bund futures have moved away from session highs as European equities find a short-term base, but a risk-off theme remains dominant following US officials’ tough weekend tariff rhetoric.
- Bunds are +125 ticks at 131.77, having pushed through Friday’s 131.48 high. Next resistance is the March 3 high at 132.04, clearance of which would expose key resistance at the Feb 28 high of 132.56.
- Initial support is Friday’s low at 129.78, but pullbacks short of the 20-day EMA at 129.02 will be considered corrective.
- Dovish repricing in ECB rate cut expectations (OIS now price 87bps of easing through year-end) helps EGB curves bull steepen, with Schatz yields down 17bps at typing at 1.657%.
- Sour risk sentiment sees 10-year EGB spreads to Bunds widen notably, with BTPs and GGBs underperforming Bunds by over 10bps on the session.
- This morning’s regional data has not been market moving, with hard data already stale given US tariff developments (German Feb IP weaker than expected, German trade Feb balance narrower than expected, Euro area Feb M/M retail sales weaker than expected).
- However, the more timely April Sentix indicator was much weaker-than-expected at -19.5 (vs -9.0 cons, -2.9 prior).
- Further developments in the tariff complex are the primary focus for the rest of the session.
