ISRAEL: PM Repeats Threat Of Seizing Gaza Territory If Hostages Not Freed

• RES 4: 110-25   High Dec 12
• RES 3: 110-19   76.4% retracement of the Dec 6  - Jan 13 bear leg    
• RES 2: 110-14   High Dec 14
• RES 1: 109-24/110-00 High Feb 21 / 7 and the bull trigger 
• PRICE:‌‌ 109-16+ @ 10:55 GMT Feb 24
• SUP 1: 108-21+ Low Feb 19      
• SUP 2: 108-04/00 Low Feb 12 / Low Jan 16
• SUP 3: 107-06   Low Jan 13 and the bear trigger
• SUP 4: 107-04   Low Apr 25 ‘24 and a key support 

Treasury futures are holding on to the bulk of their most recent gains. A resumption of the move higher would expose the next important resistance and a bull trigger at 110-00, the Feb 7 high. Clearance of this level would strengthen a bullish theme and open 110-19, a Fibonacci retracement. On the downside, key short-term support has been defined at 108-04, the Feb 12 low. Clearance of this support would reinstate a bearish theme.

• In the equity space, S&P E-Minis faded sharply off their recent highs, last week. The move down appears corrective - for now - and a bullish theme is intact. Attention is on the key resistance at 6178.75, the Dec 6 ‘24 high. A break of this hurdle would resume the primary longer-term uptrend. On the downside, initial key near-term support has been defined at 6014.00, the Feb 10 low. A breach would highlight a bearish development and expose 5935.50, the Feb 3 low.
• The trend direction in EUROSTOXX 50 futures remains up and last week’s climb to a new alltime high on the continuation contract, reinforces a bull theme. Note too that moving average studies are in a bull-mode set-up, highlighting a dominant uptrend and positive market sentiment. Sights are on 5574.57 next, a 2.382 projection of the Nov 21 - Dec 9 - 20 ‘24 price swing. Initial firm support to watch is 5379.97, the 20-day EMA.

A tweak to the debt brake cannot be ruled out following the German election, explaining this morning’s ~0.5bpsnarrowing in long-dated German ASWs vs. 3-month Euribor.

• However, concessions that Die Linke may demand to support any debt brake modifications continue to cloud the German fiscal outlook and issuance picture, limiting initial market follow through.
• Ultimately, our political risk team believes that Die Linke's opposition to voting with the AfD and support for broader fiscal loosening is likely to mean its lawmakers do not vote down a debt brake reform amendment.
• As such, fundamentals continue to point towards further long-dated ASW spread tightening, but already short positioning and ongoing fiscal uncertainty may limit tightening moves in the near-term.
• Zooming out, continued restraint when it comes to defence spending risks the scorn of U.S. President Trump, which could place further pressure on Germany, both politically and economically.

Fig. 1: German Bund & Buxl ASWs Vs. 3-Month Euribor

Source: MNI - Market News/Bloomberg