Non-Committal Into Knife Edge ECB Decision, Generally A Little Firmer

Bund futures consolidate within the early Thursday range, +20.

• The contract sticks to boundaries set in recent sessions after the pullback from Asia-Pac highs, with participants somewhat non-committal ahead of the impending ECB decision. The decision is seen as a very close call re: the hike/no hike outcome.
• A move higher in crude oil has helped cap outright bonds.
• Recent sessions have seen the contract breach 130.35, Sep 7 low. This reinforces bearish conditions and extends last week’s move down. Moving average studies remain in a bear mode position, highlighting a primary downtrend. A continuation would expose 129.72, the Aug 15 low and a key support. Short-term gains are considered corrective. Resistance is at 131.14, the 20-day EMA.
• The major German cash benchmarks are little changed to 1.5bp richer, with a very modest steepening move seen on the curve.
• Both the German 2s10s and 5s30s curves comfortably shy of their respective recent steeps.
• Core/semi-core spreads to Germany are little changed on the day, while the major peripheral spreads that we monitor trade within 1bp of yesterday’s closing levels vs. Bunds.
• You can see more on market pricing on the ECB-dated OIS strip, as well as our full ECB preview, here.