EGBS: Selloff Loses Momentum As 10-year Bund Yields Meet Resistance At 2.90%
Dec-11 10:29
- 10-year Bund yields were unable to push through the 2.90% figure yesterday. With the recent selloff appearing to have lost a little momentum, some sell-side desks have issued tactical long trades overnight.
- The German curve is twist steeper, with 2-year yields down 1bp and 30-year yields up 2bps. German bonds underperform swaps across the curve.
- It’s notable that against a backdrop of recent hawkish ECB repricing, the German IFO institute significantly revised down its 2026 and 2027 GDP projections, despite the incoming domestic fiscal expansion.
- Bund futures are +3 ticks at 127.46, unwinding post-Fed strength seen overnight. Initial resistance is the Dec 8 high at 128.08, with rallies short of this level considered corrective.
- EUR swaption vol has moderated from extremes seen earlier this week, which has provided a modest narrowing impulse to 10-year EGB spreads to Bunds. The OAT/Bund spread notably lags, stuck at 71.5bps which seemingly reflects lingering political uncertainty. 3/5-year BTP supply was digested smoothly.
- This afternoon’s focus will be on US jobless claims data.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
EQUITY OPTIONS: EU Bank Put buyer
Nov-11 10:27
SX7E (19th Dec) 190p, bought for 0.30 in 15k.
FOREX: EURGBP Bounces from Support Again After Weak Labour Market Report
Nov-11 10:16
- Softer-than-expected UK labour market data has prompted December BoE cut pricing to reach ~80%, and in tandem has provided some renewed pessimism for GBP which sits at the bottom of the G10 leaderboard.
- Downward pressure for GBPUSD (-0.33%) looks set to snap a 4-day winning streak, which saw the pair meaningfully correct from recent cycle lows of 1.3010 to 1.3191 highs on Monday. The bounce fell short of initial resistance at 1.3231, the 20-day EMA. Moving average indicators continue to signal a bearish trend, potentially strengthening the narrative that recent gains could be considered corrective.
- Sterling weakness even more notable in the cross, with EURGBP rising 0.45% to 0.8812 at typing. Once again, dips remain very well supported around the prior breakout level at 0.8769, highlighting the dominant uptrend. Topside targets remain at 0.8835 and 0.8875, the April 2023 high.
- It’s well documented that BoE Governor Bailey is viewed as the key swing vote and this morning’s data increases the odds of him opting to cut next month. However, it is worth noting there will be one more labour market print and two CPI releases before the next decision. With the other 8 MPC members having entrenched views, GBP volatility around non-Bailey speeches is likely to be much reduced ahead of the budget on Nov 26.
MNI: GERMANY ZEW NOV ECONOMIC EXPECTATIONS 38.5
Nov-11 10:00
- MNI: GERMANY ZEW NOV ECONOMIC EXPECTATIONS 38.5
- GERMANY ZEW NOV CURRENT CONDITIONS -78.7
