EQUITIES: In Oversold Territories

This morning, Germany will open its new on-the-run 10-year 2.60% Aug-35 Bund (ISIN: DE000BU2Z056) for E6bln.

• The size of this auction was increased by E1bln from E5bln in the Q3 calendar update. The E6bln auction size is the largest for a non-Schatz German auction since 2011 (and the largest of any German auction since September 2023). This is also the only E6bln German auction scheduled for Q3.
• Demand metrics in German auctions have recovered recently after a phase of weakness towards the beginning of Q2, and that also applies to the 10-year segment. At the last June 11 auction of the (previous on-the-run) 2.50% Feb-35 Bund, the bid-to cover came in at 2.69x and the bid-to-offer at 2.09x - a significant improvement from the 1.38x bid-to-cover / 1.06x bid-to-offer seen at a weak auction in late April. These metrics compare to a 1.38x - 2.84x range for bid-to-covers and a 1.06x - 2.17x range for bid-to-offers seen in German 10y auctions this year.
• At the last two 10y auctions (Jun 11, May 21), the secondary market mid-price has also been below the lowest accepted price again - contrary to the two 10y auctions ahead of that.
• Germany last week announced its 2025 budget details and 2026-29 broad financial plans, with the resulting issuance ramp-up, on balance, being perceived as quicker than expected by analysts previously. For our view on the events, see here.
• The next German auction will be E5bln of the new Oct-30 Bobl (ISIN: DE000BU25059) on June 8, while the 2.60% Aug-35 Bund will be re-opened on July 23, also for E5bln.
• Timing: Results will be available shortly after the bidding window closes at 10:30GMT / 11:30CET.

• US Tnotes is making an attempt through that initial support of 111.22 now, and the next support area will come at 111.13+.
• There's been a roll in German Bonds, helps explain why the German 10yr Yield spiked towards 2.65% on the open, printed a 2.644% high so far Today.
• The Heavy Bund supply has kept the pressure on Bund with EGBs also taking their cues from the US Govies.
• US Cash Tsys are trading cheaper and steeper, the US 5/30s if off Yesterday's low, which was its flattest level in 6 sessions.

Gilt futures close yesterday’s opening gap higher, basing at 93.10 before recovering to ~93.20.

• Little to add on the headline front, with bulls remaining in technical control.
• Initial support at the 20-day EMA (92.78) remains untouched.
• Yields 1.5-2.5bp higher, curve biased steeper.
• Local focus on this morning’s Mar-28 supply and comments from BoE dovish dissenter Taylor (more on the latter to follow in due course).