OPTIONS: Slightly Slower Sonia / Euribor Activity To End Busy Week

Wednesday's Europe rates/bond options flow included:

• ERU5 97.9375/98.00cs, bought for 2 in 20k
• SFIZ5 96.20/96.25cs, bought for 1.75 in 2k
• SFIM6 96.70/96.85cs, bought for 2.75 in 6k

Yields reversed an early rise to finish lower Wednesday, with strong bull flattening evident across EGBs and Gilts.

• Gilt futures pierced Tuesday's lows in early trade, with ongoing fiscal concerns continuing to weigh on the space, but eventualy bounced; meanwhile 10Y Bund yields weakened but held the 2.80% level.
• Having found an early footing, bonds rallied through much of the remainder of the session.
• Weak US job openings data added a final up-leg to global core FI in mid-afternoon, with yields closing near their session lows. Long-end Gilts also benefited from DMO cancelling a 30Y auction in the FQ3 quarter.
• In BOE Treasury Select Committee testimony, some highlights included Lombardelli sounding more hawkish that MNI's Markets Team had assumed, while BoE's Bailey noted that the bank's decision on QT in the next few weeks "is an open decision".
• European data wasn't a market-mover, with composite PMIs in the Eurozone and UK respectively revised slightly lower/higher in the final readings.
• The German and UK curves bull flattened, with Gilts outperforming; periphery/semi-core EGB spreads tightened, with BTPs outperforming.
• Thursday's schedule includes Eurozone retail sales and an appearance by ECB's Cipollone, while Swiss and Swedish inflation will garner some attention.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 0.8bps at 1.966%, 5-Yr is down 3.3bps at 2.28%, 10-Yr is down 4.6bps at 2.74%, and 30-Yr is down 5bps at 3.356%.
• UK: The 2-Yr yield is down 2.2bps at 3.96%, 5-Yr is down 4.1bps at 4.13%, 10-Yr is down 5.2bps at 4.748%, and 30-Yr is down 9bps at 5.603%.
• Italian BTP spread down 1.7bps at 87.3bps / French OAT down 0.2bps at 79.9bps  

• RES 4: 113-06   2.236 proj of the Jul 15 - 22 - 28 price swing
• RES 3: 113-00   Round number resistance  
• RES 2: 112-28+ 2.000 proj of the Jul 15 - 22 - 28 price swing  
• RES 1: 112-19/20+ High Sep 3 / Aug 28 / 29 
• PRICE:‌‌ 112-18 @ 16:58 BST Sep 3
• SUP 1: 111-31+ 20-day EMA
• SUP 2: 111-19   50-day EMA
• SUP 3: 111-13+ Low Aug 18 and a key support  
• SUP 4: 110-25   Low Aug 1 

The trend outlook in Treasury futures is bullish and the latest pullback appears corrective. Recent gains delivered a print above 112-15+, the Aug 5 high and a bull trigger. A breach of this hurdle confirms a resumption of the current bull cycle and signals scope for an extension towards the 113-00 handle. Moving average studies are in a bull-mode position, reinforcing a bull theme. First support to watch is 111-31+, the 20-day EMA.