US 10YR FUTURE TECHS: (H5) Bull Cycle Remains In Play
- RES 4: 110-25 High Dec 12
- RES 3: 110-19 76.4% retracement of the Dec 6 - Jan 13 bear leg
- RES 2: 110-03+ High Dec 6
- RES 1: 109-30 61.8% retracement of the Dec 6 - Jan 13 bear leg
- PRICE: 109-18+ @ 11:10 GMT Feb 6
- SUP 1: 108-20+ Low Feb 4
- SUP 2: 108-06/107-06 Low Jan 23 / 13 and the bear trigger
- SUP 3: 107-04 Low Apr 25 ‘24 and a key support
- SUP 4: 106-11 2.00 proj of the Oct 1 - 14 - 16 price swing
A bull phase in Treasury futures remains in play and yesterday’s rally reinforces current conditions. Price has traded through the 50-day EMA of 109-10+. This highlights potential for a stronger reversal and sights are on 109.30, a Fibonacci retracement. On the downside, initial support to watch is 108-20+, Tuesday’s low. Clearance of it would signal a reversal and the end of a corrective cycle.
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STIR: BofA Look For Widening In EUR & GBP Front End Spreads
Bank of America forecast “reserves in the Eurozone and UK to fall towards their estimated demand level: excess liquidity in the Eurozone is forecast to fall to €2.4tln by end-2025 vs estimated demand of €1.7-2.8tln; reserves in the UK are forecast to fall to ~£630bn by end-2025 vs the PMRR of £345-£490bn.”
- They go onto to suggest that “reserves are unevenly distributed and we believe stigma will push reserve-scarce banks to the market for funding as much as possible.”
- They believe that “to the extent €STR and SONIA remain close to the depo rate and Bank Rate, respectively, any associated widening in front-end EUR and GBP spreads, such as repo-OIS (and EURIBOR-€STR in EUR), may not necessarily be inconsistent with the ECB's and BoE's floor system.”
- Ultimately, they note that “funding pressures in the Eurozone have increased in secured markets” and they expect unsecured funding pressures to rise, recommending remaining paid 1y1y EURIBOR-€STR.
OAT: Block trade
French Block trade, suggest seller:
- OATH5 ~1.95k at 122.51.
BTP and OAT are slowly starting to underperform Germany (Bund), and all futures contract Hovers near their respective lows.
LOOK AHEAD: Tuesday Data Calendar: JOLTS, ISM Services, Tsy 10Y Re-Open
- US Data/Speaker Calendar (prior, estimate)
- 7-Jan 0800 Richmond Fed Barkin economic outlook, (text, Q&A)
- 7-Jan 0830 Trade Balance (-$73.8B, -$78.3B)
- 7-Jan 1000 JOLTS Job Openings (7.744M, 7.740M)
- 7-Jan 1000 JOLTS Job Openings Rate (4.6%, 4.6%)
- 7-Jan 1000 JOLTS Quits Level (3.326M, --), Rate (2.1%, --)
- 7-Jan 1000 JOLTS Layoffs Level (1.633M, --), Rate (1.0%, --)
- 7-Jan 1000 ISM Services Index (52.1, 53.5)
- 7-Jan 1000 ISM Services Prices Paid (58.2, 57.5)
- 7-Jan 1000 ISM Services Employment (51.5, 51.4)
- 7-Jan 1000 ISM Services New Orders (53.7, 54.2)
- 7-Jan 1130 US Tsy $85B 42D CMB auction
- 7-Jan 1300 US Tsy $39B 10Y Note re-open (91282CLW9)
