BUNDS: Highest Yield since August 2011
Oct-20 07:01
Bund is through the October low, that was 135.14.
In Yield, reference 135.00:
- 2.45% equates to 134.94.
- 2.50% = 134.35
- 2.557% = 133.67 (61.8% retrace 2008/2020 fall)
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OUTLOOK: What to watch
Sep-20 06:42
- This morning's big event will be the Riksbank policy decision at 8:30BST / 9:30CET. We would be inclined to expect a 75bp rather than a 100bp hike but we think there is a good chance that the Riksbank decides to stop bond reinvestments in Q4-22. We have read through and summarized 14 sell side previews, with 12/14 looking for a 75bp hike (the remaining two look for a 100bp hike) while OIS markets price closer to 100bp. See the full MNI Riksbank Preview here.
- Bund futures are already below yesterday's lows following continued reaction to this morning's record-high German PPI print. There is heavy day of supply ahead in the Eurozone with a Spain 20y and ESM 3-year syndication, Finland auction and Italian exchange auction but little else on the EZ data calendar today.
- Markets will already have one eye on tomorrow's FOMC decision. Along with a 75bp hike at the September meeting, the FOMC will attempt to cement “higher for longer” rate pricing. With changes to the statement likely to be limited, immediate focus will be on the Dot Plot’s end-2022 median rate forecast and the 2023 “terminal” rate, for which sell-side expectations center on 3.9% and 4.2%, respectively. MNI sees a flatter Fed funds rate “Dot Plot” than consensus, though risks to the 2023 Dot lie to the upside of 4.1%. See the full MNI Fed Preview here.
GERMAN DATA: Energy Price Spike Choking German Industry
Sep-20 06:34
GERMANY AUG PPI +7.9% M/M (FCST +2.4%); JUL +5.3% M/M
GERMANY AUG PPI +45.8% Y/Y (FCST +36.8%); JUL +37.2% Y/Y
- The spike in energy prices (up 20.4% m/m alone) towards the end of August resulted in a record high month-on-month increase of +7.9% and annual increase of 45.8% in German PPI.
- Supply chain disruptions due to the Ukraine war and Chinese lockdowns alongside weak growth outlooks continue to heavily hamper German industrial production, which contracted in July. This adds to the risk of a Q3 recession for the German economy.
- Energy contributed to higher headline figures for sub-indexes intermediate goods (+17.5% y/y), capital goods (+7.8% y/y) and durable/nondurable consumer goods (+10.9% and +16.9% y/y). Energy and gas redistributors are paying over double compared to August 2021.
- Metals, chemicals and fertilisers are also up 32.9% y/y, majorly impacted by the collapse in trade with Ukraine and Russia.
Source: Destatis
BUNDS: Big German PPI beat keeps Govies offered on the cash open.
Sep-20 06:28
- Bund came under instant pressure following the big German PPI beat, Bund fell close to 30 ticks on the release, and the contract remains above 1.8% in Yield.
- Immediate support comes at 142.15, last week's low and lowest print since mid June.
- Resistance moves down to 142.91 initially.
- There's no tier 1 data left for the session in Europe, nor the US.
- SUPPLY: US sells $12bn 20yr reopening.
- SYNDICATION: ESM 2025, Spain 20yr Benchmark.
- SPEAKERS: ECB Lagarde and Muller
