US TSYS: Near Late Session Highs, Post-Auction Sentiment Improved
Dec-26 20:13
- US markets returned from Christmas holiday to weaker stocks and rates Thursday, 10Y yield climbing to 4.6393% high ) early May levels in early trade. Lower volumes on the day with European markets still closed for the Christmas holiday.
- Limited data reaction: Initial jobless claims came out near steady in the Dec 21 week, coming in at 219k (220k prior, unrevised), thus coming in a little below the 223k expected. However, continuing claims (Dec 14 week) were more mixed: the 1,910k was above the 1,881k expected but this was offset by a 13k downward revision to prior (1,864k).
- Treasury futures gapped higher after the strong $44B 7Y note auction stopped 2.2bp through with high yield of 4.532% vs. 4.554% WI, indirect take-up surged to a new record high of 87.88% from 64.08 prior (this years low).
- The Mar'25 10Y contract climbed to 108-22 high (+4). Initial technical resistance still well above at 110-03.5 (20D EMA). Curves retreated from earlier steeper levels, currently mixed: 2s10s -0.583 at 24.425 (23.998 low vs. 27.611 high), 5s30s +1.662 at 32.778 (30.154 low / 33.404 high).
- Friday data calendar: Advance Goods Trade Balance (-$101.3B, -$98.3B prior rev), Wholesale Inventories MoM (0.2%, 0.1%) and Retail Inventories MoM (0.1%, 0.3%) at 0830ET.
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EURJPY TECHS: Bearish Tone
Nov-26 20:00
- RES 4: 167.40 61.8% retracement of the Nov 11 - Aug 5 bear leg
- RES 3: 165.04/166.69 High Nov 15 / High Oct 31 and the bull trigger
- RES 2: 164.76 High Nov 20 and a key short-term resistance
- RES 1: 163.29 50-day EMA
- PRICE: 160.91 @ 16:46 GMT Nov 26
- SUP 1: 159.93 Low Nov 22
- SUP 2: 159.56 61.8% retracement of the Sep 16 - Oct 31 bull cycle
- SUP 3: 158.11 Low Sep 30
- SUP 4: 157.87 76.4% retracement of the Sep 16 - Oct 31 bull cycle
EURJPY remains soft. The break lower last week cancels a recent short-term bullish reversal signal and suggests scope for a deeper retracement. Sights are on 159.56, a Fibonacci retracement. Key short-term resistance has been defined at 164.76, the Nov 20 high. Clearance of this hurdle would highlight a possible reversal once again and signal the end of the current bearish corrective cycle.
EGBS: BONDS: EGBs-GILTS CASH CLOSE: Highest OAT/Bund Spread Since 2012
Nov-26 19:52
Today’s EGB focus came later in the session with a sharp widening in the 10-year OAT/Bund spread, rising 5bps to 86bps for its highest since 2012 according to Bloomberg.
- Much of the OAT underperformance started from ~15:30GMT, along with a notable pick up in OAT future volumes vs below average Bund future volumes.
- Earlier today, the EC approved France’s 2025 draft budgetary plan, as had been reported by Bloomberg last week. The EC did however note that “the risks to achieving the fiscal objectives for 2025 set out in the Draft Budgetary Plan are tilted to the downside, and mainly relate to the favourable macroeconomic assumptions underpinning the budgetary targets set in the Draft Budgetary Plan”.
- Further, some desks noted the potential impact of this story from Le Parisien "The government will fall": Macron expects Barnier to fall. On the sidelines of the decoration ceremony for Élisabeth Borne this Monday at the Élysée, the president made a few confidences. If in front of the camera, he has always refused to comment on the government's choices, in private, he predicts the censorship of the Prime Minister by Marine Le Pen."
- PM Barnier has since appeared on local TV, reiterating on TF1 at 8pm CET the aim to cut the budget deficit to about 5% GDP whilst seeing a financial market ‘storm’ if the budget isn’t passed per Bloomberg headlines from the appearance.
- The 10-year BTP/Bund spread also widened ~3.5bps in the afternoon to leave it 1.5bps wider on the day at 127.6bps for its highest since Nov 13.
- Gilts weren’t immune from the widening, with the 10-year spread to Bund widening 3.3bps to 216.4bps.
COMMODITIES: Crude Falls on Ceasefire Approval
Nov-26 19:34
- WTI is heading for close trading lower after Israel Prime Minister Netanyahu announced his approval of a ceasefire deal to end fighting with Hezbollah in Lebanon.
- WTI Jan 25 is down by 0.5% at $68.6/bbl.
- A bearish theme in WTI futures remains intact, with attention on $65.74, the Oct 1 low, and $63.90, the Sep 10 low and key support.
- Initial firm resistance to watch is unchanged at $72.41, the Nov 7 high.
- Meanwhile, spot gold is little changed today, with the yellow metal just 0.1% higher at $2,627/oz, despite a brief spike higher earlier in the session on headlines of a possible further escalation in tensions between Russia and Kyiv.
- From a technical perspective, yesterday’s sharp pullback is considered corrective, for now, and the long-term trend condition remains bullish.
- Resistance to watch is $2,721.4, yesterday’s high. Clearance of this level would be a bullish development. Key support is $2,536.9, the Nov 14 low.
- Silver is outperforming slightly, up 0.6% on the day at $30.5/oz, with the gold-silver ratio at 86.2, around 1% below yesterday’s 2½-month high.
- Medium-term bullish conditions in silver remain intact, although the corrective cycle that started on Oct 23 is still in play, exposing $28.446, a Fibonacci retracement. Initial firm resistance to watch is $31.287, the 50-day EMA.
