June 04, 2024 06:27 GMT
Bunds Just Off Yesterday’s High
EGBS
Bund futures are little changed, but shy of yesterday’s highs, geopolitical worry and demand at the latest 10-Year JGB auction help underpin through the old open.
- RXU4 last little changed at 130.62. Moves beyond yesterday’s high would expose nearby resistance at the 20-day EMA (130.99)
- German 2- & 10-Year yields finished Monday a little over 10bp off last week’s ’24 highs, with the soft U.S. data allowing the early rally to extend.
- The 10-Year OAT/Bund spread looked through Friday’s negative French rating action from S&P, suggesting that many had expected such a move, with the spread already off ’24 wides as France enacts/eyes further spending cuts.
- The 10-Year BTP/Bund spread stuck around 130bp, even with Italian PMI data generating some worry when it came to Italian economic matters. The seemingly imminent start of the ECB’s easing cycle provides a backstop for widening at this juncture.
- The combination of slightly firmer equity markets, Friday’s positive trend change for Spain at Morningstar DBRS and the outright bond rally allowed SPGBs to register fresh cycle tights vs. Bunds on Monday, moving to the tightest level seen since ’22.
- Swiss CPI and German unemployment data provide the data points of note this morning.
- Roll activity is also set to continue ahead of Thursday’s expiry, although yesterday’s activity took roll pace estimates above 60% in all German FI contracts (most are above 70%).
- Germany is set to come to market with EUR4.5bn auction of the 2.90% Jun-26 Schatz. We also look for the syndication of a E3bln WNG tap of the 1.80% Aug-53 Green Bund, after yesterday’s mandate announcement. Elsewhere, Austria will sell a little over EUR2bn of its 3.45% Oct-30 RAGB
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