EGBS: Tight Ranges For Core Bonds, Mixed Supply Outcomes
Oct-02 09:35
Bund futures little changed at 128.605. Initial support and resistance at 128.26/24 & 128.82 remain intact. Our technical analysts suggests that recent gains in the contract only appear corrective, with the medium-term bearish theme intact.
- German yields flat to 1.5bp lower, curves flatter.
- EGB spreads to Bunds flat. OAT supply passed smoothly.
- EUR 10s30s swaps curve holds steeper after one of the larger Dutch pension funds showed increased confidence in its proposed pension transition date yesterday, shy of September highs.
- Gilts also in narrow ranges. Futures flat at ~90.90. Bears remain in technical control, with initial support and resistance still located at 90.26 & 91.28, respectively.
- Fiscal worry remains front and centre for the UK long end. The latest FT report has reaffirmed existing estimates surrounding the fiscal “black hole” (~GBP30bln).
- 10-Year gilt supply saw soft demand. The bid/cover was lowest seen at a 10-Year auction since ’23, albeit skewed by increased auction sizes over that horizon.
- BoE-dated OIS still shows just ~5bp of BoE easing through year-end. We continue to suggest that the market underprices the odds of a Q4 cut.
- The latest BoE DMP survey had something for both the hawks and doves.
- Looking forwards, ECBspeak from de Guindos, Villeroy and Makhlouf is due this afternoon. Don’t expect much in the way of meaningful view changes/fresh commentary given the broader accord currently struck within the Governing Council and the fact that all three have spoken recently. EUR STIRs show less than 10bp of additional easing in the current cycle.
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GERMAN AUCTION RESULTS: 1.90% Sep-27 Schatz
Sep-02 09:32
| 1.90% Sep-27 Schatz | Previous | |
| ISIN | DE000BU22106 | |
| Total sold | E4.5bln | E5bln |
| Allotted | E3.552bln | E3.916bln |
| Avg yield | 1.96% | 1.90% |
| Bid-to-offer | 1.60x | 1.97x |
| Bid-to-cover | 2.03x | 2.51x |
| Avg Price | 99.867 | 99.995 |
| Low Price | 99.865 | 99.995 |
| Pre-auction mid | 99.862 | 99.983 |
| Previous date | 05-Aug-25 |
FOREX: EURUSD Slides Back Below 1.1630, Relative Resilience in the Crosses
Sep-02 09:31
- Amid the broader dollar demand on Tuesday, EURUSD has extended its decline through last Friday’s close to print fresh session lows of 1.1624 in recent trade. Spot remains shy of the recent lows at 1.1574, however, traders will focus once again on a potential daily close below the 50-day EMA. The average now intersects at 1.1611.
- Given the bullish trend conditions and ongoing narrative surrounding further EURUSD strength into Q4, there remains a high risk that positioning dynamics could exacerbate the selloff, however for now the acute risks for other nations is providing some relative resilience for EUR crosses today.
- This is highlighted by the 0.45% appreciation for EURGBP, which has tested the 0.8700 mark once more. Today’s price action has resulted in a breach of resistance at 0.8674, the Aug 25 and 29 high. The break signals a stronger reversal and suggests scope for climb towards 0.8744, the Aug 7 high. Key resistance and the bull trigger is at 0.8769, the Jul 28 high. A break of this level would place the cross at the highest level since May 2023.
- For EURJPY, moving average studies are in a bull-mode position highlighting a primary uptrend. Key resistance to watch is the Jul 28 high of 173.97. Clearance of this level would confirm a continuation of the bull cycle.
EURUSD TECHS: Corrective Pullback
Sep-02 09:29
- RES 4: 1.1851 High Sep 10 2021
- RES 3: 1.1829 High Jul 01 and the bull trigger
- RES 2: 1.1789 High Jul 24
- RES 1: 1.1743 High Aug 22
- PRICE: 1.1627 @ 10:28 BST Sep 2
- SUP 1: 1.1574/1.1528 Low Aug 27 / Low Aug 5
- SUP 2: 1.1392 Low Aug 1 and bear trigger
- SUP 3: 1.1373 Low Jun 10
- SUP 4: 1.1313 Low May 30
Despite today’s sell-off in EURUSD, the trend set-up remains bullish and weakness is considered corrective. Note that the pair has recently pierced key support around the 50-day EMA, currently at 1.1611. A clear break of the average would signal scope for a deeper retracement and potentially expose key medium-term support at 1.1392, Aug 1 low. Key resistance and the bull trigger is 1.1829, Jul 1 high. A breach would resume the primary uptrend.
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