SPAIN AUCTION PREVIEW: Bono/Obli Auction At 0930GMT/1030CET
At 0930GMT/1030CET, Spain will hold a Bono/Obli auction. On offer will be a combined E5.0-6.0bln of the on-the-run 2.70% Jan-30 Bono (ISIN: ES0000012O00), the 0.85% Jul-37 Obli (ISIN: ES0000012I24) and the 1.00% Oct-50 Obli (ISIN: ES0000012G00).
- Last weeks Bono/Obli/ObliEi auction passed smoothly.
- The on-the-run 2.70% Jan-30 Bono was launched in November last year, and the December re-opening attracted a 2.04x bid-to-cover ratio for the E1.311bln issued. The low price of 101.570 also exceeded the pre-auction mid-price of 101.511.
- The off-the-run 0.85% Jul-37 Obli was last re-opened in July 2024, and attracted a 1.38x bid-to-cover ratio for the E1.771bln issued.
- The 1.00% Oct-50 Obli was last-reopened in July 2023.
- Note that we expect a new 10-year Obli to be launched via syndication next week with a size of E10-15bln.
- 10-year SPGBs have tightened alongside peripheral peers since the turn of the year, narrowing 4.5bps to ~65bps. In comparison, 10-year BTPs have tightened 2.5bps against Bunds, OATs 3.5bps, PGBs 5bps and GGBs 6bps.
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US TSYS: 10-Year Yields Eye 4.50%, Would See Breakout Of Medium-Term Downtrend
In addition to the technical levels already identified in U.S. 10-Year Tsy yields (4.50% the next obvious upside target, last trading 4.415%) it is worth noting that the benchmark continues to operate within the medium-term downtrend channel drawn off the ’23 high (upper boundary at 4.46% today).
- Also worth highlighting that the 50-DMA crossed above the 200-DMA last week, forming a golden cross to signal the positive S/T momentum shift.
- If sustained, this would deepen the risk of a further upside move in yields, at least from a technical analysis standpoint.
- Tomorrow’s FOMC decision presents the key risk event this week.
- Analysts are unanimous in expecting a 25bp rate cut, but there are varying opinions on the path of rates ahead and the number of ’25 cuts that the Fed will signal in its Dot Plot.
- Click for our full preview.
Fig. 1: U.S. 10-Year Tsy Yield (%)
Source: MNI - MArket News/Bloomberg
EGB OPTIONS: Latest Schatz Options
Schatz Options are active this Morning:
- DUG5 107.20/107.50cs 1x2, bought for 2.5 and 3 in 3.25k.
- DUG5 107.20/107.60cs 1x2, sold at 4.5 in 7.5k.
GILT TECHS: (H5) Gap Lower Strengthens The Bear Theme
- RES 4: 95.57 High Dec 11
- RES 3: 95.05 20-day EMA
- RES 2: 94.50 High Dec 16
- RES 1: 93.87 Low Dec 16 and gap high on the daily chart
- PRICE: 93.45 @ 08:14 GMT Dec 17
- SUP 1: 93.28 Intraday low
- SUP 2: 93.00 Round number support
- SUP 3: 92.78 3.236 proj of the Dec 3 - 4 - 5 minor price swing
- SUP 4: 92.63 3.382 proj of the Dec 3 - 4 - 5 minor price swing
A strong bearish theme in Gilt futures remains in play and today’s gap lower reinforces current bearish conditions. The move down has resulted in a breach of key short-term support at 93.40, the Nov 18 low. A break of this level strengthens the bear condition and highlights a stronger reversal. Sights are on the 93.00 handle. Initial firm resistance is at 95.05, the 20-day EMA. The contract is oversold, short-term gains would be considered corrective.
