BUNDS: /SWAPS: A Little Tighter As Bunds Tick Lower
German ASWs trade 0.3-0.8bp lower on the day (vs. 3-month Euribor), with the front end leading the move.
- This comes alongside a downtick in outright bonds and unwinds most of yesterday’s modest ASW widening.
- While the language deployed by the Greens during yesterday’s Bundestag debate on fiscal loosening was deemed combative, most still expect a deal to be done, paving the way for fiscal loosening ahead of the new Bundestag sitting on 25 March.
- The constitutional court rulings, which should come by 18 March, seem to present the major risks to the central view.
- Looking further out, the maturity profile of the related debt issuance and ultimate size of German fiscal loosening will be key for ASW, assuming all of the aforementioned hurdles are overcome.
- Commerzbank note that “given the remaining uncertainties, it is difficult to say where exactly the market will eventually find its equilibrium, but we see the potential for a further 10-15bp move in Bund swap spreads”.
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FOREX: FX OPTION EXPIRY
Of note:
EURUSD 1.51bn at 1.0390/1.0405.
USDJPY 1.65bn at 153.50/153.75.
AUDUSD 1.04bn at 0.6200 (a bit far).
EURUSD 2.3bn at 1.0375/1.0400 (thu).
EURUSD 3.29bn at 1.0400 (fri).
USDJPY 1.7bn at 153.85/154.00 (fri).
AUDUSD ~1bn at 0.6300 (fri).
USDCNY 2.16bn at 7.3000 (fri).
EURUSD 1.69bn at 1.0300 (tue).
- EURUSD: 1.0300 (1.9bn), 1.0305 (209mln), 1.0325 (1.04bn), 1.0340 (754mln), 1.0350 (239mln), 1.0375 (200mln), 1.0380 (280mln), 1.0390 (318mln), 1.0400 (850mln), 1.0405 (343mln).
- GBPUSD: 1.2450 (430mln).
- USDJPY: 153.15 (531mln), 153.50 (840mln), 153.70 (589mln), 153.75 (225mln).
- AUDUSD: 0.6200 (1.04bn), 0.6300 (283mln).
- AUDNZD: 1.1100 (295mln).
BONDS: Off Lows As Oil Ticks Lower
The downtick in crude oil is probably providing some background support for core global FI markets after the initial supply-/equity-induced pressure, with major bond markets edging away from session lows in recent trade.
- Little in the way of fresh fundamental news flow to report.
- Presence of long end supply from Germany and the equity uptick leaves EGB spreads to Bunds little changed to ~1bp tighter on the day, although the long end OAT syndication, as well as Portuguese and Greek issuance is also eyed.
EURIBOR OPTIONS: Call Condor buyer
- ERM5 97.875/98.00/98.125/98.25c condor, bought for 4.75 in 2k.
Last Week saw some similar interest buying of the same Condor vs the 97.75/97.625ps, they were paying 2 for that condor vs ps structure.
