EGBS: Passing Of Supply Helps Major EGB Futures Extend Higher
Sep-04 09:37
The smooth passing of today’s Spanish and French supply appears to have helped major EGB futures extend session highs, with RXU5 now +45 ticks at 129.67. This sees Bunds test resistance at 129.69 (50-day EMA), which shields key short-term resistance at 129.90 (Aug 28 high).
- This morning’s headline flow has been relatively light, with continued weakness in Brent crude futures lending some support to the FI complex.
- The German curve leans bull flatter, alongside its more closely watched (at the current juncture) UK counterpart. Yields are 1.5 to 5bps lower across the curve, with 5s30s down 2.3bps at 104.7bps.
- Today’s LT OAT auction did not raise any major alarm bells regarding demand for French debt amid heightened domestic political/fiscal uncertainty. The 10-year OAT/Bund is 1bp narrower today at 79bps. Focus remains on the fallout from Monday’s no-confidence vote, with PM Bayrou likely to be ousted.
- Eurozone July retail sales were slightly weaker than expected, but this was offset by an upward revision to June (-0.5% M/M vs -0.3% cons, 0.6% prior revised from 0.3% initial).
- Irish final Q2 GDP data is due at 1100BST. If heavily revised, it could have ramifications for the Eurozone-wide GDP reading tomorrow.
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GERMAN AUCTION RESULTS: 1.90% Sep-27 Schatz
Aug-05 09:32
| 1.90% Sep-27 Schatz | Previous | |
| ISIN | DE000BU22106 | |
| Total sold | E5bln | E5bln |
| Allotted | E3.916bln | E3.899bln |
| Avg yield | 1.90% | 1.87% |
| Bid-to-offer | 1.97x | 1.81x |
| Bid-to-cover | 2.51x | 2.33x |
| Avg Price | 99.995 | 100.064 |
| Low Price | 99.995 | 100.060 |
| Pre-auction mid | 99.983 | |
| Previous date | 15-Jul-25 |
GILTS: Basis Trade
Aug-05 09:29
Gilt Basis trade:
- G U5 ~1.46k at 92.54.
BONDS: 10-year Gilt/Bund Spread Tightens Post Auction
Aug-05 09:25
Solid demand at today’s 10-year Gilt auction helps the Gilt/Bund spread fully unwind early widening. The spread is now 0.5bps tighter on the session at 188bps, after reaching a high of 190bps ahead of the Gilt supply.
- 10-year Gilt yields are currently 4.51%, eyeing another test of the 4.50% level which provided support earlier this morning. The UK curve is lightly twist flatter, with 2-year yields up 0.5bps.
- German yields are up to 1bp higher across the curve, ahead of E5bln 1.90% Sep-27 Schatz supply at 1030BST.
- 10-year EGB spreads to Bunds are within 0.5bps of yesterday’s closing levels. Austria sold 8/10-year RAGBs this morning.
- Gilt and Bund futures are up to 5 ticks above yesterday’s settlement levels, still holding onto most of Friday’s US labour market report-inspired rally. A bullish theme is currently intact in both contracts.
- Today’s regional data calendar has been heavy, but not very market moving. Industrial production was stronger-than-expected in France and Spain, while the Eurozone final July services/composite PMIs saw marginal downward revisions. Eurozone June PPI was 0.8% M/M (vs 0.9% cons, -0.6% prior).
- The UK final July services PMI was revised up to 51.8 (vs 51.2 flash), but labour market details remain weak.
- Broader focus remains on Thursday’s BOE decision. MNI preview here.
