EGBS: Modest Upside Pressure In Yields; Markets Look Through e
German yields are 2-3bps higher, with the curve lightly steepening. Moves in long-end JGBs once again set the tone at the European open, following a soft 40-year auction overnight. Steepening flow in futures (Bund/Schatz block) will have also contributed to the EGB curve moves.
- Long-end Bund supply was digested smoothly, and may have weighed a little on the space ahead of the 1030GMT bidding deadline, despite the small size.
- Bund futures are -20 at 130.75, with initial support at 130.46 (50-day EMA). Today's range has been just 30 ticks wide.
- The spread has been set for today’s 10-year Spanish syndication. MNI expects a E10-13bln size.
- 10-year EGB spreads to Bunds are up to 1bp wider, with European equity futures softening. The BTP/Bund spread remains just below the 100bp handle.
- 1-year ahead ECB expectations surprisingly rose to 3.1% Y/Y (vs 2.8% cons, 2.9% prior). However, longer-term expectations were steady, limiting the market reaction. French Q1 GDP confirmed flash estimates at 0.1% Q/Q.
- Regional focus remains on Friday’s flash inflation data from Spain, Germany and Italy.
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EGBS: Bunds Soften Amid More Sanguine Risk Backdrop
Bund futures are -36 ticks at 131.23, with global risk sentiment exhibiting a more sanguine tone this morning ahead of a heavy data schedule later this week. Futures are in consolidation mode and continue to trade just below their recent highs, with the 20-day EMA at 130.64 providing initial support. On the topside, focus remains on 132.03, the April 7 high and the bull trigger.
- The German curve has lightly steepened, with 30-year yields up 5bps and 5s30s +1.7bps at 88.7bps, still some way off the April 9 multi-year high of 96.5bps.
- This morning, the EU held its first ever triple-line EU-bond auction, with E5.056bln of 5/10/15-year EU-bonds sold. Meanwhile, Belgium will sell E2.8-3.2bln of OLOs at 1100BST.
- 10-year EGB spreads to Bunds are up to 1.2bps wider on the session.
- ECB’s Rehn and De Guindos are scheduled to speak at 1400BST today.
- This week’s heavy Eurozone data calendar includes flash inflation prints for April and a first look at Q1 GDP across member states. MNI’s inflation preview will be released this afternoon.
EU-BOND AUCTION RESULTS: 5/10/15-year EU-bonds
| 2.875% Oct-29 EU-bond | 3.00% Dec-34 EU-bond | 3.375% Oct-38 EU-bond | |
| ISIN | EU000A3L1CN4 | EU000A3K4ES4 | EU000A3K4D74 |
| Amount | E2.056bln | E1.826bln | E1.174bln |
| Previous | E2.6bln | E1.902bln | E1.9bln |
| Avg yield | 2.330% | 2.984% | 3.380% |
| Previous | 2.627% | 2.982% | 3.268% |
| Bid-to-cover | 1.26x | 1.23x | 1.42x |
| Previous | 1.53x | 1.91x | 1.44x |
| Avg Price | 102.263 | 100.124 | 99.930 |
| Low Price | 102.250 | 100.090 | 99.900 |
| Pre-auction mid | 102.221 | 100.053 | 99.852 |
| Prev avg price | 101.072 | 100.143 | 101.180 |
| Prev low price | 101.050 | 100.120 | 101.140 |
| Prev mid-price | 101.033 | 100.057 | 101.101 |
| Previous date | 27-Jan-25 | 27-Jan-25 | 15-Jul-24 |
GILTS: Resistance Holds, Yields A Little Higher On Trade Outlook
Gilt futures continue to trade below Friday’s highs, after U.S. Treasury Secretary Bessent pointed to progress on trade deals, particularly with Asia, helping boost European equities.
- Futures trade in a 93.03-33 range.
- The recent bullish technical theme remains intact. Initial resistance located at Friday’s high (93.34), follow by a Fibonacci retracement level at 93.44.
- Initial support still located at the 20-day EMA (92.22 today).
- Yields little changed to 2bp higher, curve now steepening after flattening in early trade.
- Initial yield support in 10s located at 4.460% today (which also equates to that 93.44 Fibonacci level in futures).
- Final manufacturing PMI data (Thursday) headlines a limited domestic data calendar this week.
- BoEspeak from Ramsden (Tuesday) & Lombardelli (Wednesday) will also be eyed.
- BoE-dated OIS still fully discounting the next 25bp cut in May and showing ~90bp of cuts through year-end.
- On the supply front, the DMO will come to market with 30-Year (Tuesday) & 3-Year (Wednesday) paper this week.
- Elsewhere, the BoE will sell GBP750mln of short maturity gilts from the APF this afternoon.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
May-25 | 4.204 | -25.5 |
Jun-25 | 4.073 | -38.7 |
Aug-25 | 3.869 | -59.0 |
Sep-25 | 3.759 | -70.0 |
Nov-25 | 3.616 | -84.3 |
Dec-25 | 3.563 | -89.6 |
