Off Best Levels After Breaching Friday’s High

Bunds fade from best levels through the old futures open, to last print +30 or so around 134.30, ~25 ticks shy of best levels of the day.

• That keeps the recovery from last week’s multi-week low shallow.
• Technically, the contract traded lower last week and remains in a bear-mode. The move down strengthens the current bear trend and reinforces the short-term importance of the recent break below the 20-day EMA. Key support at the Dec 8 low (134.37), has been breached and this opens the Dec 4 low (133.42). Initial resistance is at the 20-day EMA (135.34). A clear break of the average is required to ease bearish pressure.
• Weakness in Chinese stocks provided the focal point in Asia hours, but Bunds showed little reaction on that front.
• A technical break of Friday’s high will have added some flow-based momentum overnight, while geopolitical worry centred on the Middle East and a modest downtick in crude oil futures (supply news-related) likely provided some fundamental support.
• Thursday’s ECB decision provides the focal point of this week’s regional docket, with some focus on the potential for further pushback against dovish market pricing perhaps limiting/reversing the Asia bid.
• Only lower tier European economic data is due today and the ECB is in its pre-meeting quiet period.
• The sovereign bond issuance slate is empty today but we do note that the EU has a syndication scheduled this week (we pencil in tomorrow as the most likely date). We don’t have a strong view on what will be on offer, but given the strong demand at other syndications recently, we would expect to see a relatively large dual-tranche offering.