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• In the FI space, for now, a short-term bearish theme in Bund futures remains intact. The contract has traded through support at the 50-day EMA, at 130.53. This signals scope for a deeper retracement and this week’s extension strengthens the current bearish threat. A continuation lower opens 129.28, 50.0% of the Mar 11 - Apr 7 rally. It is still possible that the move down since Apr 22 is a correction. Initial resistance to watch is 130.72, the 20-day EMA.
• The latest pullback in Gilt futures appears corrective - for now. However, the contract has traded through support at the 50-day EMA, at 92.46. The breach signals scope for a deeper retracement and Monday’s move down resulted in a print below 91.73, the Apr 17 low. An extension of the bear leg has exposed 91.43, the Apr 15 low (pierced). A clear break of this level would expose 90.92, the 76.4% retracement of the Apr 9 - May 2 rally. Initial firm resistance is seen at 92.57, the 20-day EMA. A breach of this hurdle would ease bearish pressure.

• EU1b 5Y Fixed (May 21, 2030) at MS+65 (MNI saw a good chance for a E1.0-1.5bln transaction size)
  • Revised guidance MS+70a (+/-5) will price in range, guidance MS+80 area
  • Books above EU3.4b (including JLM interest): Leads
  • Coupon: Annual, act/act ICMA
• Format: Reg S CAT1, registered, senior unsecured
• Settlement: May 21, 2025
• ISIN: XS3075496896
• Bookrunners: BNPP (B&D), GS, JPM
• Timing: May price today

Details as per Bloomberg

MBA composite mortgage applications increased 1.1% last week (sa) to essentially hold steady after a noisy period on swings in mortgage rates. Spreads to swap rates have stopped climbing although mortgage rates look set for a further increase ahead. 

• Overall applications stand at 53% of 2019 levels, close to the 51.5% in late March ahead of tariff announcements that sparked large gyrations in rates,
• That equates to 64% vs 61% for new purchase applications and 41% vs 41% for refis.
• The 30Y conforming rate ticked up 2bp last week to 6.86% despite an 11bp increase in the average 10Y swap rate over the week.
• It sees the mortgage rate to swap spread tighten for the first time last March, to 306bp from 315bp at what had been the widest since Feb 2024.
• That could mark a peak in what has been an additional 30-35bp tightening in lending standards since April but is just one week of data.
• Further mortgage rate increases are likely ahead with the 10Y swap rate currently trading 13bp higher than last week’s average.