EUROZONE ISSUANCE: EGB Supply

• RES 4: 92.88 High Jan 2 
• RES 3: 91.61 20-day EMA 
• RES 2: 91.58 High Jan 8 
• RES 1: 90.31 High Jan 9              
• PRICE: 89.25 @ Close Jan 14
• SUP 1: 88.96 Low Jan 13                             
• SUP 2: 88.87 2.764 proj of the Dec 20 -27 - Jan 2 price swing  
• SUP 3: 88.53 3.000 proj of the Dec 20 -27 - Jan 2 price swing
• SUP 4: 88.19 3.236 proj of the Dec 20 -27 - Jan 2 price swing

The trend condition in Gilt futures is unchanged, the direction remains down and last week’s fresh cycle lows reinforce current conditions. Recent weakness also highlights an acceleration of the trend. Sights are on 88.87 next, a Fibonacci projection. Initial resistance is at 90.31, the Jan 9 high. Resistance at the 20-day EMA, is at 91.61. The EMA is seen as an important hurdle for bulls.

Germany and Spain both still look to hold auctions this week. We also pencil in syndications from Austria, Ireland and France, although we may only get one or two of these this week with no countries holding syndications today with UK and US CPI upcoming – we will be looking out for mandates for these countries today as well as a possible RFP from the EFSF ahead of a potential transaction next week. The EU and Greece have already held syndications while Italy, the Netherlands and Germany have held auctions this week. We pencil in estimated gross issuance for the week at E51.3bln, down from E62.5bln last week.

• Today, Germany will return to the market to sell E1bln of the 1.80% Aug-53 Bund (ISIN: DE0001102614) alongside E1.5bln of the 30-year 2.50% Aug-54 Bund (ISIN: DE000BU2D004).
• Tomorrow, Spain will hold a Bono/Obli auction, to sell 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).

For more details on issuance this week and next week see the full document here: EZ250115.pdf

• UK markets have been volatile but this week’s data is still very much in focus, with CPI data headlining at 7:00GMT.
• The median from the previews that we have read look for headline CPI to come in at 2.60%Y/Y (mean 2.61%Y/Y, Bloomberg consensus is 2.6%Y/Y). This is 14 hundredths above the BOE’s 2.46%Y/Y forecast.
• In terms of services CPI, the median of the previews we have read is 4.75%Y/Y (mean 4.79%Y/Y; Bloomberg median 4.8%Y/Y).
• The main drivers in the slowdown in headline CPI in December versus November are air fares, core goods and tobacco, with petrol prices expected to offset these moves to some extent.
• The factor with the potential to have the largest impact on CPI is the choice of price collection date. This is widely expected to be Tuesday 10 December (quite early in the month and quite far away from Christmas). However, there is a chance that the ONS selects Tuesday 17 December. We discuss the impact of the collection date on the release in our preview.

For the full document click here.