SPAIN AUCTION PREVIEW: Bono/Obli auction at 09:30GMT / 10:30CET
This morning, Spain will hold a Bono/Obli auction to sell a combined E4.5-5.5bln of the on-the-run 2.40% May-28 Bono (ISIN: ES0000012O59) and the 2.70% Jan-30 Bono (ISIN: ES0000012O00) alongside the 3.55% Oct-33 Obli (ISIN: ES0000012L78).
- The 2.40% May-28 Bono was launched in January and re-opened in February. E2.6bln was issued at each auction, attracting an average bid-to-cover ratio of 1.57x. At the February re-opening, the low price of 100.030 exceeded the 100.010 pre-auction mid.
- The 2.70% Jan-30 Bono attracted a 1.52x bid-to-cover ratio for the E2.5bln issued at the January re-opening. The low price was 99.670, above the 99.642 pre-auction mid. The December re-opening attracted a 2.04x bid-to-cover, but only E1.3bln was issued.
- The 3.55% Oct-33 Obli was last re-opened in November 2023.
- The 5- and 10-year SPGB/Bund spreads remain close to multi-year lows, but Spain’s strong economic performance versus Eurozone peers should continue to facilitate demand for SPGBs at upcoming debt issues.
- We expect the second Spanish syndication of 2025 to be held in February (we pencil in W/C 24 February). We think that the most likely new issue would be either a 20-year 2045 Obli (there is currently no 2045 Obli) or a long 15-year 2041 Obli.
- Timing: Results will be available shortly after the bidding window closes at 09:30GMT / 10:30CET.
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Historical bullets
GILTS: Off Early Highs, Syndication Eyed
The early uptick in gilts fades, as participants assess the mixed labour market data (soft quantity readings vs. firmer-than-expected private wages) and the latest developments in the U.S. tariff playbook.
- Futures peaked at 91.79 before fading back to ~91.60.
- Initial resistance at the January 17 high (91.96) untested.
- That leaves the bearish technical trend intact in the contract, initial support at the January 16 low (90.68).
- Yields flat to 1bp lower.
- Spread to Bunds 1bp wider at 214bp.
- The DMO has released the minutes of yesterday's consultations with gilt market participants, details available in a previous bullet.
- BoE-dated OIS showing ~63bp of cuts through year-end, matching pre-gilt open levels, 1bp more dovish on the day.
- SONIA futures flat to +2.0, back from early highs.
- On the lookout for the syndicated tap of the 4.375% Jan-40 gilt. Bookrunners have indicated this will likely be today’s business, in line with our own expectation.
RIKSBANK: Thedeen Pushes Back On Mortgage Policy Proposals
Riksbank Governor Thedeen pushed back on the proposal for more relaxed macroprudential policies in the housing market, stating that “just making it easier to borrow will not solve long-term housing market challenges”.
- The Inquiry, which was presented in November 2024, proposed a relaxation of amortisation requirements for households, an increase in the mortgage cap to 90% (from 85% currently) and a new debt-to-income cap of 550%.
- Thedeen believes “households are more resilient with amortisation requirements and mortgage caps than they would have been without them, and relaxing credit rules too much risks reversing this trend”.
- He notes that “there is a risk that the Inquiry's proposals could push up housing prices, increase household debt and make households more vulnerable to shocks.”
- Pushback against the Inquiry’s proposals was also seen in the Riksbank’s H2 ‘24 Financial Stability Report, and a recent speech by Deputy Governor Bunge.
- The Riksbank will provide a full assessment of the matter after the Government submits a proposal for consultation regarding the Inquiry’s proposals (expected in the Spring).
SILVER TECHS: Scope For Gains Near-Term
- RES 4: $34.903 - High Oct 23 and the bull trigger
- RES 3: $33.125 - High Nov 1
- RES 2: $32.338 - High Dec 12 and a key resistance
- RES 1: $30.974 - HIgh Jan 16
- PRICE: $30.490 @ 08:19 GMT Jan 21
- SUP 1: $29.509/28.748 - Low Jan 13 / Low Dec 19 and bear trigger
- SUP 2: $28.446 - 76.4% retracement of the Aug 8 - Oct 23 bull cycle
- SUP 3: $27.686 - Low Sep 6
- SUP 4: $26.451 - Low Aug 8
A bear cycle in Silver that started Oct 23 remains in play - for now - and recent gains appear corrective. However, the metal traded higher last week suggesting scope for a continuation near-term. An extension would expose key resistance at $32.338, the Dec 12 high. Clearance of this level would signal a reversal. On the downside, support to watch is $29.509, the Jan 13 low, and $29.748, the Dec 19 low and the bear trigger.
