EGBS: Pressured By Italian Supply And NatGas Rally
Feb-27 10:37
Major EGB futures have been pressured by this morning’s Italian supply and a sharp reversal higher in European natural gas futures.
- Bund futures are -6 ticks at 132.61, unwinding yesterday’s post settlement rally which came amid fresh US tariff threats against the EU. Key near-term resistance at 132.97 (Feb 13 and Feb 26 high) remains intact. Light support in Bund is seen at 132.58.
- The German curve has lightly twist steepened, with 2-year yields 1bp lower and 30-year yields 2bps higher.
- Spanish flash February headline HICP was in line with consensus at 2.9% Y/Y, though core CPI was lower-than-expected at 2.1% (vs 2.3% cons, 2.4% prior).
- Meanwhile, Eurozone January money and credit data signalled that the restrictiveness of ECB policy is waning, though German and French lending conditions remain subdued.
- 10-year peripheral spreads to Bunds are slightly wider, with European equities also softer today (albeit off lows). 5/10-year BTP and CCTeu supply was digested smoothly.
- The accounts of the ECB’s January meeting are due at 1230GMT, though broader macro focus will be on the US Q4 GDP readings.
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OUTLOOK: Price Signal Summary - S&P E-Minis Support Holds For Now
Jan-28 10:34
- In the equity space, the S&P E-Minis contract initially traded lower Monday extending the pullback from last Friday’s high. Key short-term support to watch lies at 5961.75, the Jan 16 low (pierced). For now, the move down appears corrective, however, a clear breach of 5961.75 would strengthen a bearish threat and signal scope for a deeper retracement, towards 5943.94, 61.8% retracement of the Jan 13 - 24 bull leg. Key resistance is 6178.75, the Dec 6 ‘24 high.
- A bull cycle in the EUROSTOXX 50 futures contract remains intact and the move lower from last Friday’s high, is considered corrective. A deeper retracement would allow an overbought trend condition to unwind. Moving average studies remain in a bull-mode set-up highlighting a dominant uptrend. The first important support to watch is 5097.39, the 20-day EMA. A resumption of the uptrend would open 5298.50, the 1.500 projection of the Nov 21 - Dec 9 - 20 price swing.
GERMAN AUCTION RESULTS: New 2.20% Mar-27 Schatz
Jan-28 10:32
| 2.20% Mar-27 Schatz* | Previous | |
| ISIN | DE000BU22080 | DE000BU22072 |
| Total sold | E5bln | E4.5bln |
| Allotted | E3.816bln | E3.472bln |
| Avg yield | 2.26% | 2.18% |
| Bid-to-offer | 2.15x | 1.81x |
| Bid-to-cover | 2.81x | 2.34x |
| Average Price | 99.873 | 99.652 |
| Low acc. Price | 99.870 | 99.650 |
| Pre-auction mid | 99.647 | |
| Previous date | 07-Jan-25 |
FOREX: Universal Tariff Talk Puts USD Index Back Above 50-dma
Jan-28 10:30
- The greenback is clawing back a small part of the recent lost ground, aiding the USD Index back above the 50-dma (107.648). As a result, markets are back above the 23.6% retracement for the year-to-date range in the currency, which helps add to the argument for a near-term bounce off lows for the dollar. It's the Fed decision ahead, and in particular any observations on the neutral rate, that should trigger short-term conviction here.
- Having been the best performer across G10 on Monday, the JPY is weaker against most others into Tuesday's NY crossover. Equity sentiment remains a key driver here, and the bounce off lows for the e-mini S&P has been instructive in the pullback for the JPY today.
- Trump tariff threats have further worked in favour of the greenback, as they re-demonstrate the concerns around a further inflationary impulse. Both the President and his Treasury Secretary talked up the benefits of universal import tariffs overnight, with Bessent eyeing 2.5% tariffs as a starting point, but Trump claiming he wants "much bigger" levies.
- Preliminary durable goods orders and the Conference Board's consumer confidence stats for January are next to cross, but are unlikely to shake up markets given the proximity to the Fed on Wednesday. The central bank speaker schedule remains very contained, with both the FOMC and ECB's Governing Council inside their pre-meeting media blackout periods.
