OIL PRODUCTS: Oil Products End of Day Summary: Cracks Fall

Core European yields rose to start the week, with Bunds underperforming Gilts Monday.

• State-level German data in the morning correctly pointed to an upside surprise in the preliminary December national level inflation release in the afternoon.
• Having apparently confirmed the trend seen in solid Spanish and Portuguese data last week, inflation breakevens rose (EUR 5Y5Y swap +2.9bp to the highest since mid-Nov at 2.08%), paring ECB cut pricing. Final Eurozone PMIs for December also saw upward revisions and firmer price pressures.
• Supply concerns also weighed on core FI, with UK, Austrian and German auctions Tuesday alongside an expected Belgian 10Y syndication.
• The German curve bear flattened, with the UK's lightly bear steepening.
• Periphery/semi-core spreads tightened, with OATs slightly outperforming in a partial reversal of late December's sell-off.
• Tuesday's early highlights include inflation data from Switzerland, France, Italy, and the Eurozone.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 3.3bps at 2.194%, 5-Yr is up 3.3bps at 2.263%, 10-Yr is up 2.2bps at 2.447%, and 30-Yr is up 1bps at 2.663%.
• UK: The 2-Yr yield is up 1.1bps at 4.433%, 5-Yr is up 1.6bps at 4.401%, 10-Yr is up 1.7bps at 4.61%, and 30-Yr is up 2.3bps at 5.179%.
• Italian BTP spread down 3.8bps at 112.5bps / French OAT down 5.0bps at 81.1bps
   

• RES 4: 1.2874 High Nov 12  
• RES 3: 1.2811 High Dec 6 and key resistance    
• RES 2: 1.2698 50-day EMA 
• RES 1: 1.2562 20-day EMA 
• PRICE: 1.2518 @ 18:29 GMT Jan 6
• SUP 1: 1.2353 Low Jan 2
• SUP 2: 1.2300 Low Apr 22 2024
• SUP 3: 1.2277 2.0% 10-dma envelope
• SUP 4: 1.2266 Low Nov 14 2023   

The sharp sell-off in GBPUSD last Thursday confirmed a resumption of the medium-term downtrend. The move lower maintains the bearish price sequence of lower lows and lower highs and note that moving average studies are in a bear-mode position, highlighting a clear downtrend. Monday’s strong gains are - for now - considered corrective. Initial firm resistance is at 1.2562, the 20-day EMA. The bear trigger is 1.2353, the Jan 2 low.

• +17,000 SFRH6 96.015 (-0.015) Block at 1402:11ET (DV01 $425k) with additional +20,000 on screen in the last few minutes. The Red Mar'26 trade 96.02 last