Bunds Stabilise Ahead Of Support Cluster, BTP Syndi Demand Provides Some Relief After Valore

Bund futures move nearer to the clustered support zone (130.50-60), printing as low as 130.66 before stabilising around 130.70.

• German cash yields are flat to 1.5bp higher on the day, as the curve steepens a little. 2s10s & 5s30s stick within recent ranges.
• This morning’s ZEW data was firmer than-expected, although Bunds had already turned away from highs alongside gilts, as some light dovish moves following BoE comments faded.
• The swelling IG issuance slate has helped keep a lid on rallies, even with sovereign auctions passing smoothly and the now almost customary round of sizeable demand seen at the latest EU & EGB syndications.
• Solid to strong demand at the green BTP syndication provides some light relief after the softer-than-normal retail demand at last week’s Valore offering. This helps peripherals to print little changed to a touch tighter vs. Bunds.
• A reminder that most sell-side desks deemed any headwinds for retail demand as a second order risk for BTPs in the immediate term (at most). Overall funding worries are subdued and the focus on the seemingly impending start to the ECB’s rate cutting cycle have provided insulation during recent BTP spread widening episodes.
• Hedging of the syndications will be eyed around pricing.