Little Changed As Initial Support Fades

Core/semi-core EGBs are little changed.

• Chinese economic data and notable EGB-related cash flows appeared to support EGBs at the open, but gains have faded.
• A modest rebound in crude oil futures may have limited/countered the early EGB rally.
• Bund futures are +7 at 130.82, having traded in a tight 27-tick range today (130.71-98).
• We have seen a 35K lot trade in the RXM4 131.00/132.50/134.00/135.50 call condor vs. the RXN4 131.50/133.00/134.50/136.00 call condor (-M4/+N4).
• This likely represents a rolling ‘up and out’ of an existing position.
• German and French cash yields are little changed, while 10-year peripheral spreads to Bunds are biased a touch tighter.
• Today’s Eurozone calendar is very light, with little data and no scheduled ECB speakers.
• We remain on syndication watch.
• The EU has a syndication scheduled for the week ahead with an RfP having been sent out already. The most likely new bonds would be conventional 15/30-year EU-bonds but the EU could also choose to just tap existing issues.
• Also on the syndication side, we see Austria and the ESM (or possibly the EFSF) as the most likely candidates to conduct additional transactions.