CROSS ASSET: Bund Futures Dip As HB Reports Agreement Between German Parties

TYH5 108.50 puts 4.7K given at 0-15, 11K trade all day, between 0-16 and 0-14.

Bund futures are just off session lows, currently -19 ticks at 132.51 (lows of 132.48). The 20-day EMA at 132.63 has been pierced, with 132.34 the next downside target.  Sovereign supply has once again weighed on EGBs, with a downtick in oil prices providing only temporary reprieve. 

• German yields are 2-3bps higher, with the curve lightly bear flattening.
• The spread has been set for today’s 30-year OAT syndication, while conventional issuance has come from Greece, Germany and Portugal.
• Italian industrial production was much weaker than expected at -3.1% M/M (vs -0.2% cons, 0.3% prior), though it can be a volatile series month-to-month.
• 10-year EGB spreads to Bunds are up to 1.5bps tighter.
• Resident ECB hawk Holzmann unsurprisingly warned against 50bp cuts – but this probably already aligns with the median Governing Council view.
• Broader macro focus remains on the US CPI report at 1330GMT/1430CET. 

• In the equity space, price action on Feb 3 in the S&P E-Minis contract S&P E-Minis contract, continues to highlight a possible short-term reversal threat. If correct, it suggests that the latest bounce is a correction. A resumption of weakness would open 5892.37, the 76.4% retracement of the Aug 5 - Dec 6 bull leg. On the upside, a stronger rally would expose key resistance at 6178.75, the Dec 6 ‘24 high. Clearance of this hurdle would resume the primary uptrend.
• EUROSTOXX 50 futures traded higher Tuesday and the contract is holding on to its gains. The move higher confirms once again, a resumption of the uptrend that started on Nov 21 ‘24. Moving average studies are in a bull mode set-up too, highlighting a dominant uptrend. The focus is on 5434.10 next, a 2.236 projection of the Dec 20 - Jan 8 - Jan 13 price swing. Initial firm support to watch lies at 5243.32, the 20-day EMA.