EGBS: Tight Ranges Ahead of US Labour Market Report

EGB futures volumes have been subdued, with markets awaiting the US labour market report at 1330GMT/1430CET. Bund futures are +3 ticks at 133.44, towards the top of today’s tight 23 tick range.

• A bull cycle in Bund futures remains in play, with the contract consolidating above the 50-day EMA. Next resistance is 133.73, the 50.0% retracement of the Dec 2 - Jan 14 bear leg.
• German yields are up to 1.5bps lower on the session.
• German industrial production was much weaker than expected at -2.4% M/M (vs -0.7% cons, 1.3% prior), but wasn’t a market mover. Meanwhile, the December trade surplus surprisingly increased to E20.7bln (vs E17.0bln cons; E19.7bln prior).
• The ECB’s report on neutral rates is due at 1200GMT/1300CET. The report will likely contextualise President Lagarde’s most recently cited neutral range of 1.75-2.25%. However, several Executive Board speakers (de Guindos, Lane, Cipollone) have played down the importance of neutral in calibrating near-term policy this week.
• 10-year EGB spreads to Bunds are biased up to 1bp wider, with European equities a little softer today. The BTP/Bund spread was unable to clear YTD lows of ~106.4bps.