EURIBOR OPTIONS: Early Euribor Option Flow

Last night’s German fiscal reform headlines also drag ASW spreads lower across the curve.

• The long end leads the move, with Buxl vs. 3-month Euribor ~5.2bp narrower.
• Schatz ASW hits fresh ’25 lows, while Bobl, Bund and Buxl ASWs all hit fresh cycle lows (all vs. 3-month Euribor).
• We had stressed that the outlook for long end swap spreads remained bearish, but the unexpected size, scope and speed of the tabled fiscal reform package is being felt across the curve.
• Focus now moves to ratification of the package, which needs to be pushed through before the new Bundestag sits later this month, with support from the Greens/Liberals required (both have criticised the table, although the Greens have not ruled out support for the debt brake tweaks).
• In terms of additional issuance surrounding fiscal tweaks, Commerzbank suggest that “the additional money for defence will most likely not become funding relevant before next year. Higher issuance for investment could perhaps happen more quickly but is also unlikely on a larger-scale near-term. Germany has never been able to meet its budgeted investment plans in recent years. Last year, €56.7bn was spent, which was a record high, but well short of the €70.8bn that was budgeted, and this year's financing plan already includes investments of €81bn”.

• RES 4: 121.00 Round number resistance       
• RES 3: 120.49 High Feb 7 and a bull trigger  
• RES 2: 120.12 High Mar 4  
• RES 1: 119.31 Low Mar 4 and a gap high on the daily chart      
• PRICE: 118.30 @ 07:19 Mar 5 
• SUP 1: 118.21 Intraday low 
• SUP 2: 117.66 76.4% retracement of the Jan 14 - Feb 7 bull leg 
• SUP 3: 117.03 Low Jan 15 
• SUP 4: 116.78 Low Jan 14 and a key support    

BTP futures have gapped sharply lower today. This undermines a recent bullish theme and instead highlights a developing bear threat. Price is trading below a recent key support at 118.63, the Feb 19 low. A continuation down would pave the way for a move towards 117.66, a Fibonacci retracement point. On the upside, initial firm resistance is seen at 119.31, the Mar 4 low and a gap high on the daily chart.

• MNI: SWISS FEB CPI 0.6% M/M, 0.3% Y/Y
• SWISS FEB CORE CPI 0.7% M/M, 0.9% Y/Y