BTP TECHS: (U5) Monitoring Support
- RES 4: 122.35 2.500 proj of the May 14 - 20 - 21 price swing
- RES 3: 122.00 Round number resistance
- RES 2: 121.73 High Jun 13 and the bull trigger
- RES 1: 121.13 High Aug 15
- PRICE: 120.39 @ Close Aug 19
- SUP 1: 119.59 Low Jul 25 and key short-term support
- SUP 2: 119.48 Low May 26
- SUP 3: 118.87 Low May 21
- SUP 4: 118.51 Low May 14 and key support
The primary trend condition in BTP futures is unchanged and the outlook remains bullish. However, for now, the contract is trading inside a range and the Aug 15 sell-off signals scope for a move towards the lower end of the range. Key support to watch lies at 119.59, the Jul 25 low. A clear break of this level would mark a range breakout and highlight a bearish threat. Key resistance is unchanged at 121.73, the Jun 13 high
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GILT TECHS: (U5) Maintains A Bearish Tone
- RES 4: 93.41 High Jul 2
- RES 3: 93.00 Round number resistance
- RES 2: 92.79 High Jul 4
- RES 1: 91.99/24 20-day EMA / HIgh Jul 15
- PRICE: 91.11 @ Close Jul 18
- SUP 1: 91.08 Low Jul 18
- SUP 2: 90.97 76.4% retracement of the May 22 - Jul 1 bull leg
- SUP 3: 90.59 Low May 29
- SUP 4: 90.46 Low May 23
A bear cycle in Gilt futures remains in play and last week’s bearish activity reinforces this theme. The contract has recently breached support at 91.63, the Jul 2 low. Price has also traded through 91.50, the 61.8% retracement of the May 22 - Jul 1 bull leg. The move down exposes 90.97, the 76.4% retracement point. Clearance of this level would strengthen a bearish theme. Initial firm resistance is at 91.99, the 20-day EMA.
UK DATA: MNI UK Inflation and Labour Market Insight: July 2025 Release
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- Relative to market expectations both the labour market report and CPI were a little stronger than expected.
- All in all, we think there is still enough evidence for the MPC to vote for a 25bp cut in August, and probably still enough for quarterly cuts to continue thereafter, but these data do reduce the risk of sequential cuts soon (particularly with CPI a little higher this week too) and probably swing us from quarterly cuts with a small risk of sequential cuts being the base case, to perhaps a November cut shouldn't be fully anticipated.
- We look at how sell side BOE views have evolved in light of the data releases and at market pricing over the past week.
- We also look in detail at both the labour market and CPI data.
EUROZONE ISSUANCE: EGB Supply: W/C 21 July
Germany and Italy look to hold auctions in the upcoming week. We pencil in a summer slowdown in issuance to E11.5bln, down from E31.7bln last week.
- Germany will kick off issuance for the week tomorrow with a Green auction. On offer will be E500mln of the 2.30% Feb-33 Green Bund (ISIN: DE000BU3Z005) alongside E1bln of the 2.50% Feb-35 Green Bund (ISIN: DE000BU3Z047).
- Germany will return to the market on Wednesday with E5bln of the 10-year 2.60% Aug-35 Bund (ISIN: DE000BU2Z056) on offer.
- Italy will come to the market on Thursday with a BTP Short Term / BTPei auction. We expect to see the on-the-run 2.55% Feb-27 BTP Short Term to be on offer, but have little conviction which BPTei will be on offer. Details are due to be confirmed this afternoon.
NOMINAL FLOWS: This week sees E0.9bln of redemptions, the majority (E0.8bln) from a formerly 5-year floating Portuguese OTRV. Coupon payments for the week total E7.2bln of which E6.7bln are French and E0.3bln are Portuguese. This leaves estimated net flows for the week at positive E3.5bn, down from E7.1bln last week.
