BONDS: Some activity in EGB Basis trades

• RES 4: 114-10   High Apr 7 and the bull trigger  
• RES 3: 113-00   Round number support 
• RES 2: 112-08   High Apr 8   
• RES 1: 111-00+/111-20 20-day EMA / High Apr 9 
• PRICE:‌‌ 110-19+ @ 11:12 BST Apr 15 
• SUP 1: 109-08   Low Apr 11
• SUP 2: 108-26+ 76.4% retracement of the Jan 13 - Apr 7 bull cycle
• SUP 3: 108-21   Low Feb 19
• SUP 4: 108-03+ Low Dec 12 ‘24 and a key support 

Despite yesterday’s recovery, Treasury futures maintain a softer tone following last week’s reversal lower. Price has traded through an important support - a trendline at 110-03+, drawn from the Jan 13 low. A clear break of this trendline would strengthen a bearish threat and signal scope for a deeper retracement. This would open 108-26+, a Fibonacci retracement. On the upside, initial resistance to watch is 111-00+, the 20-day EMA.

The German April ZEW survey saw a much weaker-than-projected Expectations component at -14.0 (vs 10.0 cons, 51.6 prior). Unsurprisingly, the “erratic changes in the US trade policy are weighing heavily on expectations in Germany, which have sharply declined”. The DAX index – for which monthly changes closely correlate with ZEW Expectations – fell 20% between March 18 and April 7, but has since retraced around half of this pullback.  The survey was conducted between April 7 and April 14.

• The pullback in the Expectations component was the largest since the inception of the Russia/Ukraine war in 2022.
• The press release notes that “export-intensive sectors, such as the automobile and chemical industries as well as the metal, steel and mechanical engineering sectors, which recently enjoyed improved prospects, are affected”.
• The Current Situation component was slightly stronger-than-expected at -81.2 (vs -86.9 cons, -87.6 prior), continuing the recovery from cycle lows of -93.1 in December 2024.

OI data suggests that net short cover in the reds and net long setting in the greens provided the most meaningful positioning swings of note during Monday’s twist flattening of the SOFR futures strip.