BTP TECHS: (H5) Bull Phase Remains In Play

Ratings reviews of note from after hours on Friday include:

• Fitch affirmed Austria at AA+; Outlook revised to Negative
• Fitch affirmed the EFSF’s debt at AA-
• Fitch affirmed the ESM at AAA; Outlook Stable
• Morningstar DBRS confirmed Austria at AAA, Stable Trend
• Morningstar DBRS confirmed Sweden at AAA, Stable Trend

• RES 4: 92.88 High Jan 2 
• RES 3: 92.13 20-day EMA 
• RES 2: 91.58 High Jan 8 
• RES 1: 90.31 High Jan 9              
• PRICE: 89.59 @ Close Jan 10
• SUP 1: 89.00 Low Jan 9                           
• SUP 2: 88.87 2.764 proj of the Dec 20 -27 - Jan 2 price swing  
• SUP 3: 88.53 3.000 proj of the Dec 20 -27 - Jan 2 price swing
• SUP 4: 88.19 3.236 proj of the Dec 20 -27 - Jan 2 price swing

The trend condition in Gilt futures is unchanged, it remains bearish and last week’s fresh cycle lows reinforce current conditions. The latest move down also highlights an acceleration of the trend. Sights are on 88.87 next, a Fibonacci projection. Initial resistance is at 90.31, last Thursday’s intraday high. Resistance at the 20-day EMA, is at 92.13. The EMA is seen as an important hurdle for bulls.

Italy, the Netherlands, Germany, Greece, and Spain look to hold auctions in the upcoming week. We also have a scheduled syndication from the EU and pencil in syndications from Austria, Ireland and France (see prior bullet). We pencil in estimated gross issuance for the week at E45.6bln, down from E61.5bln last week.

• Italy will look to kick issuance off for the week today with a 3/7 year BTP auction which sees both on-the-run issues reopened as expected. Note that the 15+ year portion of the auction has been cancelled due to the dual-tranche syndication on 8 January. On offer will be E2.50-2.75bln of the 2.70% Oct-27 BTP (ISIN: IT0005622128) and E2.75-3.00bln of the 3.15% Nov-31 BTP (ISIN: IT0005619546).
• The EU has a syndication scheduled for the week ahead. We think the most likely new issues are 10-year, 3-year or 20-year (in that order).
• Tomorrow, the Netherlands will sell E1.5-2.0bln of the on-the-run 30-year 2.00% Jan-54 DSL (ISIN: NL00150012X2).
• Also tomorrow, Germany will issue E5bln of the new Apr-30 Bobl (ISIN: DE000BU25042). The coupon will be confirmed later today.
• On Wednesday, Greece will hold a GGB auction. The details will be announced tomorrow.
• On Wednesday, Germany will return to the market to sell E1bln of the 1.80% Aug-53 Bund (ISIN: DE0001102614) alongside E1.5bln of the 30-year 2.50% Aug-54 Bund (ISIN: DE000BU2D004).
• On Thursday, Spain will hold a Bono/Obli auction. On offer will be the on-the-run 5-year 2.70% Jan-30 Bono (ISIN: ES0000012O00), the 0.85% Jul-37 Obli (ISIN: ES0000012I24) and the 1.00% Oct-50 Obli (ISIN: ES0000012G00). We pencil in a E5.5-6.5bln auction size – with the size to be announced later today.

NOMINAL FLOWS: This week sees E10.1bln of redemptions from an Italian CCTeu. Coupon payments for the week total E5.5bln of which E4.1bln are Dutch and E1.3bln Italian. This leaves estimated net flows for the week at positive E30.0bln, vs positive E57.5bln last week.

For more on last week's issuance and a look ahead to next week see the MNI EGB Issuance, Redemption and Cash Flow Matrix here.