EGBS: Oil and Gas Rally Limits Upside In Bund Futures

Bund futures have pierced Monday’s high, currently +47 ticks at 133.59. Regional data/speakers have not been market moving, with major EGB futures following USTs higher through the session. 

• Today’s rally in Bunds exposes 133.73 (50.0% retracement of the Dec 2 - Jan 14 bear leg) and 133.86 (Jan 2 high) on the upside.
• The German curve has bull flattened, with 30-year yields ~4.5bps lower today.
• 10-year EGB spreads are within 0.5bps of yesterday’s closing levels. French PM Bayrou is expected to survive two censure motions later this afternoon.
• Eurozone January services/composite PMIs were broadly in line with flash prints, while December PPI was close to consensus.
• The ECB wage tracker was little changed compared to the December release, still pointing to a deceleration of wage growth this year.
• ECB Vice President de Guindos played down the role of the neutral rate in setting near-term policy an interview. This comes ahead of an ECB staff report on the concept on Friday.
• Global focus turns to the US Quarterly Refunding Announcement at 1330GMT/1430CET, with US services sentiment data also due this afternoon.

• RES 4: $2917.5 - 1.764 proj of the Nov 14 - Dec 12 - 19 price swing    
• RES 3: $2900.0 - Round number resistance
• RES 2: $2889.9 - 1.618 proj of the Nov 14 - Dec 12 - 19 price swing
• RES 1: $2872.30 - Intraday high    
• PRICE: $2842.40 @ 10:26 GMT Feb 5 
• SUP 1: $2807.3 - Low Feb 4  
• SUP 2: $2746.5 - 20-day EMA  
• SUP 3: $2730.6 - Low Jan 27  
• SUP 4: $2698.4 - 50-day EMA

A bull cycle in Gold remains in play. Last week’s extension higher and this week’s appreciation, confirms a resumption of the uptrend and maintains the bullish price sequence of higher highs and higher lows. Moving average studies are in a bull mode position too, highlighting a dominant uptrend. Sights are on $2889.9 next, a Fibonacci projection. The first key support to watch is $2698.4, the 50-day EMA. The 20-day EMA is at $2746.5.

Gilts extend higher, with core global FI markets supported by the move lower in e-minis (tech earnings and trade war worry drive e-minis lower).

• Decent demand metrics at the latest 1.50% Jul-53 green gilt auction may have factored in during recent trade.
• The auction cover topped the average across all re-openings since February ’23 (3.20x vs. average 2.94 & high of 3.26x), while the tail was narrow at 0.3bp and the low price cleared above pre-auction mids.
• Futures as high as 93.47, +70 on the day, as the bullish short-term corrective phase remains intact.
• Contract nears resistance at the Feb 3 high (93.54).
• A break there would expose Fibonacci resistance (93.64) which protects round-number resistance (94.00).
• Yields 3.5-7.0bp lower as the curve flattens, year-to-date lows intact across all benchmarks.
• BoE-dated OIS to fresh cycle dovish extremes of ~85.6bp.
• SONIA futures flat to +7.0. Dec high in SFIZ5 (96.190) untested.
• Cross-market and macro cues are set to dominate ahead of tomorrow’s BoE decision.
• Our full preview of the BoE decision can be found here.