BUNDS: /SWAPS: Long End ASWs Above Cycle Lows
Feb-26 08:57
German ASW spreads (vs. 3-month Euribor) within 0.5bp of yesterday’s closing levels.
- Schatz and Bobl spreads a touch narrower, while Bund and Buxl spreads are a little wider.
- This goes against the recent trend and could simply reflect some profit taking given short positioning in long end ASWs (both outright and vs. Schatz).
- The bid in core global FI is also supporting spreads.
- Headline flow over the last couple of days points to special fund deployment geared towards defence spending as the most likely source of German fiscal support in the immediate term, with many lawmakers seemingly keen to push this through before the new Bundestag sits in late March (a tight timeline, but doable).
- Debt brake reform is set to present a more testing point of negotiation given the incoming Bundestag composition and differing views on appropriate uses of fiscal spending amongst the political parties. Expect discussions surrounding this matter to drag out over a few months, at a minimum.
- Fundamentals continue to screen bearish for long end spreads, but we caution that crowded positioning near cycle/all-time lows in ASWs and the potential tensions in debt brake discussions present risks to this idea.
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GERMAN AUCTION PREVIEW: Coupon size announcement
Jan-27 08:54
Germany has announced the coupon of its new Mar-27 Schatz on auction tomorrow at 2.20%. E5bln of that Schatz will be on offer.
US TSY FUTURES: A busy start of the Week
Jan-27 08:53
- US Tnotes is met by some decent selling above the 109.00 figure, and already some notable volumes across Core Govies on both sides of the Atlantic.
- Further upside momentum in TYH5 opens to the next resistance seen at 109.08+, and this would be followed by 109.28, not a Tech level but where the contract was trading at before the Hawkish Powell at the last FOMC meeting in December.
- In yield terms, 4.50% is at 109.10 today.
JPY: Testing broader highs
Jan-27 08:42
- A broader bid goes through for the Yen, testing an intraday high versus the EUR, USD, AUD and GBP, the US Tnotes has broken above 109.00, helping Yields lower.
- Next immediate support in USDJPY comes at 155.15/154.97 50-day EMA / Trendline drawn from Sep 16 low, but note that it traded as low as 154.78 last Week.
