EGBS: Oil and Gas Rally Limits Upside In Bund Futures
Bund futures are +71 ticks at 127.73, supported by today’s pullback in European equities. However, topside has been limited by the rally in crude oil and natural gas prices.
- Technical conditions in Bunds remain bearish following this week’s fiscal/defence spending-induced sell-off. Any recoveries would allow an oversold condition to unwind. Initial firm resistance is seen at 129.41, the Jan 14 low.
- The German curve has lightly twist steepened, with 30-year yields up 1bp.
- Eurozone Q4 GDP saw a one tenth upward revision on a rounded basis to 0.2% Q/Q, above the flash 0.0% and advance 0.1% readings. On the other hand, German Jan factory orders and Spanish Jan IP were weak. None of the data were material market movers.
- 10-year EGB spreads to Bunds are mixed. OATs and PGBs underperform a little with spreads 1bp wider on the session.
- ECB’s Villeroy and Muller have provided somewhat cautious commentary around the rate outlook this morning.
- Broader macro focus remains on today’s US labour market report and subsequent commentary from Fed Chair Powell.
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EGBS: Bund Futures Pierce Monday's High, Following USTs Higher
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.
GOLD TECHS: Impulsive Bull Wave Extends
- 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: Firmer On Weaker Stocks & Solid Green Auction Demand
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.
