EUROZONE ISSUANCE: EGB Supply

• On Thursday, Italy will hold an auction to sell 5/10-year BTPs and a CCTeu. Details will be announced later today. We look for the on-the-run 5-year 3.00% Oct-29 BTP (ISIN: IT0005611055) to be on offer alongside 1-2 off-the-run BTPs in the 10-year area. We don’t have a strong conviction surrounding the CCTeu that will be on offer.
• We pencil in a German 30-year Bund syndication on Tuesday. We expect a similar size to last year (E6bln with E1bln retained). This avoids the Fed / ECB decision days and keeps it in January ahead of the next round of inflation data. Furthermore, a transaction this week would be before any US tariffs start while there's also been huge demand at other recent Eurozone syndications so there is incentive to get a syndication completed now as it should be cost effective with a tight spread to benchmark/swaps. There is also a gap in the auction calendar next week (W/C 3 February) – however, this coincides with the Winter holidays in some regions, so we still favour this week. 

NOMINAL FLOWS: This week sees E21.8bln of redemptions of which E21.3bln are from a formerly 5-year Spanish Bono and E0.4bln are from a LATVGB. Coupon payments for the week total E4.1bln of which E2.6bln are Spanish, E1.0bln are Greek, E0.3bln are Italian and E0.2bln are Austrian. This leaves estimated net flows for the week at positive E15.5bln, vs positive E56.5bln last week.

For more on last week's issuance and a look ahead to next week see the MNI EGB Issuance, Redemption and Cash Flow Matrix here.

• RES 4: 5335.43 1.618 proj of the Nov 21 - Dec 9 - 20 price swing
• RES 3: 5327.90 1.764 proj of the Dec 20 - Jan 8 - 13 price swing      
• RES 2: 5298.50 1.500 proj of the Nov 21 - Dec 9 - 20 price swing
• RES 1: 5276.00 High Jan 24          
• PRICE: 5178.00 @ 06:33 GMT Jan 27  
• SUP 1: 5146.00 Low Jan 21           
• SUP 2: 5086.38 20-day EMA    
• SUP 3: 5005.46 50-day EMA
• SUP 4: 4931.00 Low Jan 13 and a key short-term support  

A bull cycle in the Eurostoxx 50 futures contract remains intact and the move lower from Friday’s high, is considered corrective. The move down is allowing an overbought trend condition to unwind. Moving average studies are in a bull-mode set-up that highlights a dominant uptrend. The first important support to watch is 5086.38, the 20-day EMA. A resumption of the uptrend would open 5298.50, a Fibonacci projection. 

The EU, the Netherlands, Italy, and Germany are all due to hold auctions this week. We also pencil in a syndication from Germany. We look for estimated gross issuance for the week at E35.4bln, down from E57.2bln last  week.

• Today, the EU will hold an auction to sell up to E3bln of the 5-year 2.875% Oct-29 EU-bond (ISIN: EU000A3L1CN4) and up to E2bln of the 10-year 3.00% Dec-34 EU-bond (ISIN: EU000A3K4ES4).
• Tomorrow, the Netherlands will hold an auction to sell E2.0-2.5bln of the 5-year 2.50% Jan-30 DSL (ISIN: NL0015001DQ7).
• Following this tomorrow, Italy will hold a BTP Short Term and BTPei auction. As we expected, the new 2.55% Feb-27 BTP Short Term (ISIN: IT0005633794) will be launched for E2.75-3.0bln. Alongside this, E1.00-1.25bln of the 1.50% May-29 BTPei (ISIN: IT0005543803) and E1.00-1.25bln of the 1.80% May-36 BTPei (ISIN: IT0005588881) will be on offer.
• Also tomorrow, Germany will sell E5bln of the new Mar-27 Schatz (ISIN: DE000BU22080). The coupon will be announced this morning.
• On Wednesday, Germany will return to the market to sell E4.5bln of the 10-year 2.50% Feb-35 Bund (ISIN: DE000BU2Z049).