EU REAL ESTATE: Stoneweg: Fitch Upgrade to BBB

• In the equity space, a bull cycle in S&P E-Minis remains intact and the latest pullback is - for now - considered corrective. Price has traded through the 20-day EMA. The key support to watch lies at the 50-day EMA, at 6336.02. A clear break of this EMA is required to signal scope for a deeper retracement. This would open 6239.50, the Aug 1 low and a key support. Moving average studies still highlight a dominant uptrend. The bull trigger is 6523.00, the Aug 28 high.
• The primary trend set-up in EUROSTOXX 50 futures is bullish and the pullback from the Aug 22 high appears corrective. However, the contract has breached 5372.85, the 50-day EMA. The clear break of this average strengthens a short-term bearish threat and signals scope for a deeper retracement towards 5166.00, the Aug 1 low and a key support. On the upside, initial resistance to watch is 5392.75, the 20-day EMA.

The 2.80% handle in the 10-year Bund yield has held once again, leaving yields -0.5bps at 2.78%. Today’s E5bln 10-year Bund supply was digested smoothly, with similar demand metrics to August’s auction. 

• German yields are up to 1bp lower across the curve, with the 5-year lightly outperforming and recent bear steepening taking a breather. The broader steepening trend since 2023 remains intact though, with 5s30s currently up almost 70bps this year to 109.5bps.
• Bund futures are +12 ticks at 128.93, but remain shy of initial resistance at 129.42 (20-day EMA). That keeps risk tilted to the downside for now. 
• 10-year peripheral EGB spreads to Bunds are up to 1.5bps tighter today, led by BTPs. OAT spreads are little changed, with ongoing French political uncertainty limiting any narrowing episodes.
• Lithuania is also holding at 10/20-year dual tranche syndication today.
• Eurozone final August services PMI’s weren’t major market movers, with the composite reading reaching a one-year high of 51.0 (vs 51.1 flash, 50.9 prior). 

Gilts sold off on the open, with ongoing fiscal worry and some questions surrounding the future of Chancellor Reeves continuing to add weight.

• That was before a recovery in wider core global FI markets (note that U.S. 30s failed to break above 5.00%) provided support.
• Futures broke yesterday’s low (89.60) and Fibonacci support (89.46), basing at 89.36 before recovering to unchanged levels (~89.75). Bears remain in technical control, initial support and resistance of note now 89.22 & 90.16.
• Yields flat to 2bp lower on the day.
• 10s trade above 4.80%. January highs (4.921%) present the next upside target.
• 30-Year yields hit the highest level since the late ‘90s (5.748%) before the pullback. The 1.236 Fibonacci projection of the Jun 13-Jul 18-Aug 5 price swing (5.74%) was pierced. The next upside projection lies at 5.79%.
• Note that the Treasury has confirmed that the Budget will be released on 26 November, with Chancellor Reeves stressing that she doesn’t think the UK economy is broken.
• Final UK services PMI data was revised upwards.
• BoE-dated OIS shows ~9bp of cuts through Dec, little changed on the day. We continue to believe that the November meeting is much more “live” than the ~4bp priced into the market at present.
• SONIA futures flat to +1.0.
• BoE’s Bailey, Lombardelli, Taylor & Greene will appear in front of the Treasury Select Committee this afternoon.