EGBS: Tight Range For Bunds In Subdued Trading Session

It’s been a subdued session for global core FI markets, with Bunds trading in a tight 14 tick range on lower-than-average volumes. Markets have digested yesterday’s US labour market report, and are now waiting for tomorrow’s CPI report to assess the likely direction of Fed policy. Eurozone cues have been lacking this week, and tomorrow’s second Q4 GDP reading is unlikely to provide a meaningful impulse to EUR rates.

• Bund futures are +6 ticks at 128.73. A bull mode in Bund futures remains intact and the contract is holding on to its recent gains. The breach of 128.58, the Jan 19 high and a key short-term resistance, strengthens the short-term condition. This signals scope for an extension towards 128.89, a Fibonacci retracement.
• 10-year German yields are attempting once again to consolidate below the 2.80% figure, currently little changed on the session at 2.795%.
• Italian 3/7-year BTP supply was well digested. 10-year EGB spreads to Bunds are biased a little narrower, with the BTP/Bund spread 1bp narrower at 59.5bps.
• ECB’s Makhlouf continued to provide balanced rhetoric, noting that he was not ruling out a cut or hike to ECB rates.