SPAIN AUCTION PREVIEW: Bono/Obli Auction At 0930GMT/1030CET

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

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.

• 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.