EURGBP TECHS: Trading Just Below Its Recent Highs

• On Wednesday, Germany will come to the market to hold a 15-year Bund auction. On offer will be E1.5bln of the 1.00% May-38 Bund ISIN(DE0001102598) and E500mln of the 4.75% Jul-40 Bund (ISIN: DE0001135366).
• On Thursday, Italy will look to conclude auction issuance for the month with a 5/10-year BTP / CCTeu auction. We expect to see a reopening of the on-the-run 5-year 2.95% Jul-30 BTP (ISIN: IT0005637399) alongside a first reopening of the 10-year 3.60% Oct-35 BTP (ISIN: IT0005648149). The on-the-run Apr-33 CCTeu has already matched the size of the Apr-32 CCTeu so we are unsure of what CCTeu issue will be on offer (including the possibility of a new issue). Details will be announced later today.
• Potential upcoming syndications
  • Spain: There is currently almost E24bln outstanding of the 3.15% Apr-35 Obli (ISIN: ES0000012O67) that was launched in January. The sizes of the two issues launched last year are E24.5bln and E26.0bln (launched in January 2024 and May 2024 respectively). We think there is a good chance of a Spanish 10-year syndication as soon as this week. We pencil in a E10-15bln transaction size. There is some uncertainty around the launch time, particularly with US-EU trade talks.

NOMINAL FLOWS: This week sees large redemptions totalling E56.4bln: E37.8bln from a formerly 10-year OAT alongside E18.4bln from a formerly 5-year BTP Italia. Coupon payments for the week total E15.1bln of which E14.5bln are French, E0.3bln are Italian and E0.2bln are from the EFSF. This leaves estimated net flows for this week at negative E41.4bln, versus positive E36.6bln last week.

• RES 4: 107.812 0.618 proj of the Mar 6 - Apr 7  - 9 price swing  
• RES 3: 107.775 High Apr 7 and the bull trigger 
• RES 2: 107.600 High Apr 30  
• RES 1: 107.550 High May 7 and Friday’s high                   
• PRICE: 107.320 @ 06:25 BST May 26
• SUP 1: 107.175/070 Low May 19 / 13 and the bear trigger  
• SUP 2: 106.965 Low Apr 9 and a key support     
• SUP 3: 106.928 61.8% retracement of the Mar 6 - Apr 7 bull cycle        
• SUP 4: 106.830 Low Mar 27      

A bull cycle in Schatz futures remains intact and resistance at 107.335, the May 12 / 20 high, has been cleared. The break signals a potential stronger reversal. This exposes 107.550, the May 7 high. A break would strengthen a bullish theme. For bears, a resumption of the recent bear leg would instead signal scope for an extension towards 106.965, the Apr 9 low. The bear trigger has been defined at 107.070, the May 13 low.

Italy will look to issue a BTP Italia while there will be auctions from the Netherlands, Italy, and Germany. We also pencil in a Spanish 10-year syndication. We pencil in estimated gross issuance for the week of E30.1bln (excluding the BTP Italia), down from E37.3bln this week.

For the full MNI Issuance, Redemption and Cash Flow Matrix click here.

• Italy will look to issue a 7-year BTP Italia in the upcoming week, maturing 4 June 2032. This will be the first BTP Italia since March 2023 with an offering for retail investors between tomorrow and Thursday and for institutional investors on Friday. As usual, the BTP Italia is linked to Italian inflation (rather than Eurozone inflation).
• Tomorrow, the Netherlands will come to the market to hold an existing DSL auction. On offer will be E2.0-2.5bln of the 0% Jul-30 DSL (ISIN: NL0014555419).
• Also tomorrow, Italy will look to hold a BTP Short Term / BTPei auction. On offer will be E2.50-2.75bln of the on-the-run 2.55% Feb-27 BTP Short Term (ISIN: IT0005633794), E0.75-1.00bln of the 1.25% Sep-32 BTPei (ISIN: IT0005138828) and E0.75-1.00bln of the 1.80% May-36 BTPei (ISIN: IT0005588881).