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EGBS: Bund Futures Pressured By Crude Rally, Germany Fiscal/Political Concerns

EGBS
EurozoneBulletGlobalFixed Income BulletsRegionMarkets

Bund futures are just off intraday lows, with a rally in crude oil benchmarks and renewed fiscal/political uncertainty from Germany weighing.

  • Futures are -20 at 131.44. First support is the Oct 31 low at 131.15, shielding round-number support at 131.00.
  • Finance Minister Lindner’s latest economic proposals have led to renewed tension amongst Germany’s traffic-light coalition, while BBG sources confirmed that the government could see as much as EUR75bln of tax income removed if the Federal Constitutional Court rules against the solidarity surcharge.
  • A small upward revision to the Germany October manufacturing PMI will have kept pressure on the space. Overall, the data further cemented Spain’s position as the main engine of growth in a weak Eurozone economy.
  • The implied probability of a 50bp ECB cut in December has fallen below 15%, down from around 40% at the start of last week. The continued hawkish repricing sees the German cash curve twist flatten, with 2-year yields around 3bps higher today and 30-year yields 1.5bps lower
  • 10-year EGB spreads to Bunds have tightened as a result of the Germany-specific drivers flagged above, with the BTP/Bund spread almost 3bps tighter at 125bps.
  • 5/10-year EU-bond results are due shortly.
  • ECB’s Holzmann is scheduled to speak at 1300GMT/1400CET, though broader macro focus remains on the US election and Fed/BoE decisions later this week.
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Bund futures are just off intraday lows, with a rally in crude oil benchmarks and renewed fiscal/political uncertainty from Germany weighing.

  • Futures are -20 at 131.44. First support is the Oct 31 low at 131.15, shielding round-number support at 131.00.
  • Finance Minister Lindner’s latest economic proposals have led to renewed tension amongst Germany’s traffic-light coalition, while BBG sources confirmed that the government could see as much as EUR75bln of tax income removed if the Federal Constitutional Court rules against the solidarity surcharge.
  • A small upward revision to the Germany October manufacturing PMI will have kept pressure on the space. Overall, the data further cemented Spain’s position as the main engine of growth in a weak Eurozone economy.
  • The implied probability of a 50bp ECB cut in December has fallen below 15%, down from around 40% at the start of last week. The continued hawkish repricing sees the German cash curve twist flatten, with 2-year yields around 3bps higher today and 30-year yields 1.5bps lower
  • 10-year EGB spreads to Bunds have tightened as a result of the Germany-specific drivers flagged above, with the BTP/Bund spread almost 3bps tighter at 125bps.
  • 5/10-year EU-bond results are due shortly.
  • ECB’s Holzmann is scheduled to speak at 1300GMT/1400CET, though broader macro focus remains on the US election and Fed/BoE decisions later this week.