CREDIT PRE-MARKET: EUR Market Wrap
- 2y/10y bunds closed -1bp at 2.17%/2.81% with yields at session lows against weak US equity sentiment and a reversal of crude strength. The Bundestag voted in favour of the German fiscal package, meeting the 2/3 required threshold. USTs closed flat/-2bp at 4.04%/4.29%.
- Main/XO ended -0.3bp/-1bp at 55.9bp/304bp while €IG was -0.5bp at 0.9% (Corps -0.4bp at 0.85%, Fins -0.7bp at 0.97%, €HY -6bp at 3.05%). $IG was -0.5bp at 0.91% (Corps -0.4bp at 0.9%, Fins -0.7bp at 0.92%, $HY +3.7bp at 3.18%).
- SX5E/SPX futures closed +0.9%/-1.1% at 5485pts/5669pts. €IG movers included Deutsche Pfandbriefbank (+8%), CaixaBank (+5%), Alstom (+5%), Elia Group (+5%), SES (-7%), Aliaxis (-6%), Norstar Holdings (-4%), CK Hutchison (-3%),
- SX5E/SPX futures are -0.1%/+0.1% this morning. The BoJ was unchanged as expected, with the central bank noting high uncertainties facing the outlook but stating the wage/price cycle is strengthening. The USD is a touch higher against the other majors, with UST cash bonds slightly cheaper. Regional equities are mixed.
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USDCAD TECHS: Has Cleared Support
- RES 4: 1.4948 High Mar 2003
- RES 3: 1.4814 High Apr 2003
- RES 2: 1.4503/1.4793 High Fb 4 / 3 and key resistance
- RES 1: 1.4380 High Feb 10
- PRICE: 1.4175 @ 06:51 GMT Feb 17
- SUP 1: 1.4107 50.0% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
- SUP 2: 1.4011 Low Dec 5 ‘24
- SUP 3: 1.3944 61.8% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
- SUP 4: 1.3894 Low Nov 11 ‘24
USDCAD traded lower last week, breaking out of a tight trading range, and has cleared key support at 1.4261, the Jan 20 low. This signals scope for an extension of the current bear cycle - a correction. Scope is seen for a move towards 1.4107, a Fibonacci retracement. Initial firm resistance to watch is 1.4380, the Feb 10 high. A move above this hurdle would highlight an early bullish reversal signal.
EUROZONE ISSUANCE: EGB Supply - W/C 17 Feb (2/2)
- 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.
AUDUSD TECHS: Bull Cycle Extends
- 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
