EGB OPTIONS: Large Schatz Ladder vs Put Spread

Bund futures are +50 ticks versus yesterday’s settlement levels at 125.87. A bear condition remains intact, with initial resistance noted at 126.05 (March 23 high). Overnight news that the US has sent Iran a list of conditions for a temporary ceasefire have weighed on oil and gas prices, providing support to bonds. However, we note that the Iranian side has set a high bar for any ceasefire agreement.

• The German 2s10s curve has seen a fairly uniform 6bps shift lower, while 10s30s exhibits a more material bull steepening.
• ECB President Lagarde said that “We will not act before we have sufficient information on the size and persistence of the shock and its propagation”. This caused a partial unwind of some April ECB hike pricing at the front-end.
• 10-year EGB spreads to Bunds are narrower, with the BTP/Bund spread now back below 90bps. Spreads remain closely corelated with Iran war developments, with domestic politics (e.g. yesterday’s Italian referendum result) taking a backseat.
• Germany's IFO Business Climate Index fell in March, to 86.4 (vs 86.3 cons, 88.4 February). As in yesterday's flash PMIs, the release carries a feeling of front-running with the expectations component falling notably but the current seeing an unchanged print.
• Italy will come to the market at 1000GMT to hold a BTP Short Term / BTPei auction, while Germany will sell LT Bunds at 1030GMT.
• The remainder of today’s data calendar is light, leaving focus on Iran  war headline flow and remaining ECB commentary  from the ongoing ECB and it’s Watcher’s Conference.

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• The USD index (-0.11%) has traded in a contained manner on Wednesday, holding a relatively small 35pip range after reports of Iran receiving the US' 15-point ceasefire proposal. The contained market reaction to the proposal shows markets have priced in the fact that some kind of peace discussions are taking place following Trump’s announcement on Monday, but continue to be cautious if a ceasefire can be implemented over the near term. Having said that, Brent crude trades closer to its recent lows today, while gold prices have recovered further from Monday's selloff.
• The underperformer this session again turns out to be AUD (-0.37%) following slightly lower-than-expected Australian CPI, while the exposure of the country to the oil disruptions may additionally weigh over time. Attention for AUDUSD remains on a sustained breach of 50-day EMA support, with the average currently intersecting at 0.6983. Notably, price action today would mean the fifth consecutive session with lower highs for the pair, a bearish development worth monitoring.
• EUR sees some contained upside following a Lagarde speech that the ECB "will not be paralysed by hesitation" while they "will not act before we have sufficient information on the size and persistence of the shock and its propagation", putting attention on March Eurozone inflation kicking off on Friday.
• EURUSD has pierced resistance at the 20-day EMA, at 1.1611, however, short-term gains are - for now - considered corrective. A clear break of the average would signal scope for a stronger recovery towards resistance at the 50-day EMA, at 1.1676.
• US MBA Mortgage Applications, Import / Export prices, and Balance of Payments data is scheduled. BOE MPC Member Greene is scheduled to speak, before Fed’s Miran is due to participate in a moderated discussion at the Digital Asset Summit.