EUROZONE ISSUANCE: EGB Supply

• On Wednesday, Germany will return to the market to sell E4.5bln of the 10-year 2.50% Feb-35 Bund (ISIN: DE000BU2Z049).
• On Thursday, Spain will hold a Bono/Obli auction. On offer will be the on-the-run 2.40% May-28 Bono (ISIN: ES0000012O59) and the 2.70% Jan-30 Bono (ISIN: ES0000012O00) alongside the 3.55% Oct-33 Obli (ISIN: ES0000012L78). The size will be announced later today.
• Also on Thursday, France will hold a MT OAT auction selling a combined E11.5-13.5bln. The new 3-year 2.40% Sep-28 OAT (ISIN: FR001400XLW2), the 0% Nov-29 OAT (ISIN: FR0013451507) and the on-the-run 5-year 2.75% Feb-30 OAT (ISIN: FR001400PM68) will be on offer.
  • The launch of the new 2.40% Sep-28 OAT at the upcoming week's MT OAT auction was in line with our expectations.
  • The auction size represents another step up - the E13.5bln at the top of the target range would represent another record for a French auction if achieved. Previously the largest auction has been E13.0bln (which we have seen in the other three French auctions this year.)
• Later on Thursday, France will return to hold a IL OAT auction to issue a combined E1.50-2.25bln. the 0.10% Jul-31 OATei (ISIN: FR0014001N38). The 0.10% Jul-36 OATei (ISIN: FR0013327491), the 0.95% Jul-43 OATei (ISIN: FR001400QCA1) and the 0.10% Mar-32 OATi (ISIN: FR0014003N51) will be on offer.

NOMINAL FLOWS: This week sees redemptions of E38.7bln of which E30.5bln are from a formerly 10-year Bund, E6.0bln from a formerly 7-year EFSF bond and E2.2bln from a formerly 7-year Greek GGB. Coupon payments for the week total E5.7bln of which E2.5bln are German, E1.4bln are Austrian, E0.7bln are Italian, E0.6bln are Portuguese and E0.2bln are Irish. This leaves estimated net flows for the week at negative E3.8bln, vs positive E50.5bln 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: 0.6471 High Dec 9 ‘24 
• RES 3: 0.6429 High Dec 12 ‘24               
• RES 2: 0.6414 38.2% retracement of the Sep 30 ‘24 - Feb 3 bear leg 
• RES 1: 0.6384 High Dec 13 
• PRICE: 0.6371 @ 06:46 GMT Feb 17 
• SUP 1: 0.6303/6231 50-day EMA / Low Feb 10 
• SUP 3: 0.6171/6088 Low Feb 4 / 3
• SUP 3: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
• SUP 4: 0.6000 Round number support

AUDUSD is trading higher today as it starts the week on a bullish note. Recent gains have reinforced bullish conditions. The pair has cleared 0.6331, the Jan 24 high and a key short-term resistance. The breach highlights a stronger reversal and opens 0.6414, a Fibonacci retracement. Note that MA studies remain in a bear-mode position. This suggests the latest recovery is a correction. Initial firm support to watch is 0.6231, the Feb 10 low

Slovakia, Germany, Finland, Spain and France are all due to hold auctions this week, whilst Italy is scheduled to launch its inaugural retail BTP Piu. The ESM is likely to hold a syndication with possible syndications also to come from Belgium and Germany. We look for estimated gross issuance for the week of E40.6bln (excluding the retail operation), down from E50.9bln last week. 

• The ESM on Wednesday 12 February sent a Request for Proposal with regards to an upcoming syndicated transaction. We expect a transaction for today/tomorrow, and had flagged this possibility in our daily publication.
  • We pencil in a E2-3bln transaction size. Regarding the maturity on offer, we note that the ESM hasn’t issued a bond with longer than 10.5 years to maturity since 2018 and we would be surprised to see a longer maturity issued in the upcoming transaction. However, Greece’s borrowing under the ESM not due to be fully repaid until 2060 so a longer-dated transaction cannot be fully ruled out.
• Italy will launch its inaugural Feb-33 BTP Piu (ISIN: IT0005634792) this week with books open between Monday and Friday. The BTP Piu will form part of the BTP Valore family and will include an option for an early redemption after 4 years as well as a step-up coupon. The minimum coupon rates are 2.80% for years 1-4 and 3.60% for years 5-8.
• Today, Slovakia will hold a SlovGB auction to sell the 3.00% Feb-28 SlovGB (ISIN: SK4000024683), the 3.75% Mar-34 SlovGB (ISIN: SK4000024865), the 3.75% Feb-35 SlovGB (ISIN: SK4000022539) and the 2.00% Oct-47 SlovGB (ISIN: SK4120013400).
• Tomorrow, Germany will sell E4.5bln of the 2.20% Mar-27 Schatz (ISIN: DE000BU22080).
• Also tomorrow, Finland will hold a conventional auction to sell up to a combined E1.0-1.5bln of the 5-year 2.50% Apr-30 RFGB (ISIN: FI4000577952) and the 10-year 3.00% Sep-34 RFGB (ISIN: FI4000571104), this is in-line with our expectations.